For financial security, having a contingency fund that can take care of one's expenses for 3-6 months is a must. The contingency fund can help one tide over short-term loss of income—due to loss of job, long leave because of illness, a hit in business, etc.
It can also help meet unforeseen expenses like medical situations not covered by medical insurance, among other things. Now, the key question is, where should you put your money to create a contingency fund?
Fall in returns from liquid funds
Liquid schemes were the obvious choice for building a contingency fund. They used to generate significantly higher returns— around 8%—compared to 4% given by the ordinary savings bank accounts.
