Planning for Cash, Savings and Emergency Funds

Debt & Money Market Instrument are prominent not only in the Cash & Savings Management aspects but also in planning for Emergency Funds.



1. Cash Needs : Apart from the recurring expenses at home, one need cash for Asset acquisition and meeting other life needs like Child's Education etc..

We have avenues like Bank Accounts with no frill account, Normal savings Account that have ATM card, Debit card, cheque Books, Internet banking facility etc.. depending upon what balance one maintain with the bank.



The next thing handy is the gold ornaments that you may pledge in a necessity for a short while in the traditional context whereas the modern people use credit cards to tie up short term cash needs.



With developed capital market & terminals available across country, people use MF products like MMMFs, Liquid Funds, FMPs to manage their short term surpluses.

2. Savings : For saving a sum of money at a later point in life for acquiring an asset or meeting a life need is something, human race did from time immemorial. The earliest versions ofcourse being grains and gold stored for sale.

In our days, we have Recurring deposit accounts in Post office/banks, PPF, EPF, NSCs, RBI Relief Bonds, Treasury deposits, SIPs inMFs and Endowment Policies from Insurance companies to build up small savings over a period f time. Banks/Post offices give shorter maturities compared to MFs and Insurances. MFs can provide maximum maturities by their nature itself.

Depending upon your pocket size, the time frame of your plan for asset acquisition/life need matures , your risk apetite and the minimum amount required for acquiring the asset you can choose the asset class.

For risk taking individulas we have the equity route; With demat facilty and terminals across india, equity culture is catching up.


Once a certain amount is accumulated, it need to be converted into another asset for value harvesting and storage. This conversion time is very important in the case of highly risky equities and equity mutual funds.

Still another important lesson is about the usance period. The time required for normally moving an asset into cash in your hand. Another fact is how much time it will take for you to replace the revenue stream. This brings us to the conclusion that one needs liquid cash to meet daily routine expenses, then near cash assets and lines of ready cash supply to meet the planned expenses as well as the surprises.

3. Emergency Fund


Normally it is said that one has to maintain an amount equivalent to 3 months salary or normal income as an emergency fund. This could be augmented by credit card Or a gold loan.

Gold loan means you have acquired it earlier. It is asset backed. If you are not able to repay, you lose that one only.

The credit card is liability product. So it cannot be first line of defence. if you remit the minimum amout due only, the loan may be outstanding for next 6 years!!!


So it is always better to save and store for Emergencies. Celebrate Life, without surprises in expenses!!

Are you in the salaried class?

The salaried class has reasons to re-negotiate their pay packages in the light of the changed norms on Fringe Benefits.

The FBT abolished in the budget of 2010 wef 01 April 2009 reappeared as taxable with specific rules pronounced in December 2009 for its computation from 01 April 2009