How to Build Emergency Fund: Investment and Planning - ICICI Bank

An Emergency Fund comprises of savings that have been put aside for financial emergencies such as a job loss, political upheaval, overinflation or any other situation where funds are needed because one’s regular income has stopped / reduced. An Emergency Fund is meant to be used for expenses like groceries, electricity bills, school/college fees and more, during times of financial hardship. You can also have an Emergency Fund for handling unexpected large expenses like a medical emergency. Building an Emergency Fund is a critical step of financial planning and is essential for securing one’s future.

How to build an Emergency Fund

There are many places where one can start building an Emergency Fund. For instance, some Savings Accounts have high interest rates which allow your savings to earn interest-based income every year. These Savings Accounts are the standard way to save for an Emergency Fund. However, there are other ways in which one can save money. One such way is by creating a Fixed Deposit (FD).

Benefits of Fixed Deposit as an Emergency Fund

Here are some reasons why an FD is a good option for creating an Emergency Fund:

• An FD is a non-market-linked financial instrument which ensures that your money is secure. In addition, FDs offer steady returns at attractive interest rates that are most often higher than Savings Account interest rates.

• FDs have a lock-in period. Premature withdrawal from an FD attracts penalties and / or lower returns. This paves the path for disciplined saving and helps ensure that the corpus is not chipped away by discretionary spends.

• Tax Saving Fixed Deposits provide tax benefits under Section 80C, up to ₹1.5 lakh. 

• With ICICI Bank FDs, you can start investing with as little as ₹ 10,000 and earn interest at competitive interest rates. 

• FD interest payouts are flexible- monthly, quarterly, half-yearly or at maturity, catering to your varied needs. 

• Senior citizens who choose to save through the ICICI Bank FDs receive an extra 0.5% interest over and above the standard FD interest rate.

• You can conveniently open your Fixed Deposit within minutes from your smartphone using the ICICI Bank iMobile app.

• You have the benefit of auto renewing fd your ICICI Bank Fixed Deposit. You can easily set up the auto-renewal mode when you are opening your FD. This means that your FD is automatically renewed on maturity, for the same tenure and at the prevailing interest rate, without manual intervention. This way, no interest is lost and your Emergency Fund remains intact.