Emergency funds are very different from a savings account concerning their purpose. Emergency funds should be liquid and very easily accessible. While a savings account does not keep pace with inflation, it is for the long term “saving the money” purpose. In India, the two funds can be blended by storage. This translates that, an emergency fund can be stored in a savings account.
Emergency funds can be used in the case of: -Losing out on income. -Medical emergency -Family emergency -Housing emergency -Last minute travel
The budget of an emergency fund may vary from person to person and different lifestyles that a person chooses to live. However, a critical point to stick to is to pick up a realistic number that can cover your expenses for 6 months at the least. Filter this fund from your monthly income that won’t stress you out and, also you find yourself making easy cuts in your daily expenses.
In India, there is no specific type of accounts that hold Emergency funds. Because of this, the money can be put into a savings account or even mutual funds, as both the solutions are easily accessible in case of an emergency and liquid too.
There are situations where using a credit card might not be a bad solution, but it can only be considered if you are ready to pay off your debt by the due. And if the former one is true, it may lead to a great credit score, which can benefit you with taxes.