This corpus is kept aside to meet contingencies such as a job loss, a medical emergency or big-ticket repairs. The emphasis should be on keeping security rather than making money grow. Savings accounts or liquid funds are the best avenues to park an emergency fund as they guarantee liquidity. The yield will be low but that should not matter as the aim is not to generate an income or returns but to provide you cash in an emergency. Liquid funds allow instant withdrawal of up to Rs 50,000 or 90% of the folio, whichever is lesser.
A term plan will pay your family a predetermined amount of money in the event of your death but if you survive the term, you don’t get anything. That’s the gist of insurance. However, in an attempt to gain something out of the money people pay to the insurers, many buy a traditional plan instead. By mixing insurance with investment, they defeat the purpose of each. If you want to pay a lower premium, you will be left with an even smaller cover. Insurance should be linked only to the goal of providing financial protection to the family in the case of one’s untimely death.
While gold in itself may not be a bad investment, buying it through the jewellery route is a bad idea because first, you have to shell out 10-35% extra as making and wastage charges. Second, selling gold is tough. Most reputed jewellers exchange jewellery for other ornaments instead of paying in cash. Finally, jewellery is only a symbol of wealth which does not generate any profits for us or our future goals. You may sell it during a financial difficulty but only with the intention of replacing it sometime in the future.
The house you live in is a possession that you consume. You are unlikely to sell your house to meet a future goal and thus, it’s an asset, not an investment. Even if you do sell it, another house will have to be bought with that money or rent will have to be paid if you don’t choose to buy. So even if your home depreciates in value, you should not fret. A second property, on the other hand, will be part of your personal wealth as it may generate additional income and the change in its price will affect your overall net worth.