Liquid funds

It is clear ( I hope!) that we need to park funds for an emergency. This fund is required to ensure that during an emergency we are not running around to get money released and are focusing on resolving the emergency.

However, keeping the money in bank accounts will only get you a 4% ( or 6% at kotak) return. Definitely not inflation beating returns.

Also on this return you need to pay tax @ 30% which brings the return to 2.8% .

So , we need to try and optimize the return in this scenario and the best way to try and do this is to use the option of liquid funds.

Liquid funds are funds which are used to  fund short term requirements of big corporates and have given returns of around 8% over the last year. Also as the name suggests you can easily take out the money... Because it is short term.

I suggest that this is a good model and something all should look to do.

It's simplefinancialsense.