I talked about war chests and I talked about emergency funds before. Now, we might keep the latter in a chest as well but it should be designed differently from a war chest.
The chest we keep our emergency funds in should have double or triple locks compared to a war chest! Since we call it an "emergency fund", then, we must make sure that we only open the chest when there is an emergency.
In the meantime, the money will most probably lie fallow. Well, almost, anyway.
What? Remain in a savings account to make a miserable 0.1% in interest per annum? Why don't I invest it in a REIT and make 7% to 8% per annum? Sure, why not?
Before doing that, please redefine what is an "emergency fund". Maybe, it should be "a fund kept for times of need but it might not be there when needed".
An emergency fund has to be money that is close at hand and it has to have certainty. Certainty in uncertainty doesn't count.
So, where should we park our emergency funds?
The best choice is probably a S$ Fixed Deposit. The Deposit Insurance Scheme we have in Singapore provides us with a peace of mind too. Certainty? Certainly.
Read more about the Deposit Insurance Scheme: here.
The Deposit Insurance Scheme protects depositors in the event a DI Scheme member fails by compensating insured deposits up to a maximum of S$50,000.
1. Why a meaningful emergency fund is important?
2. Emergency fund: How much is enough?