5 Reasons Why Fixed Deposits Are Most Suitable As An Emergency Fund Despite Limitations

In uncertain times, an emergency fund acts as a safety net, providing support during crises. Fixed deposits are a good option despite limited liquidity and potential penalties for early withdrawal.

When building an emergency fund, the key considerations should be liquidity, safety, and stability. Fixed deposits (FDs) tick 5 boxes in this regard.

1. Capital Protection: FDs offer a secure and guaranteed return on investment. Since they are not subject to market fluctuations, your principal amount remains safe, making them a low-risk option | Photo: Canva

2. Predictable Returns: The interest rate on an FD is fixed, so you know exactly how much you’ll earn by the end of the tenure. This predictability can help you plan your finances better.