Last Updated:October 25, 2025, 07:47 IST

Bank customers and investors in India can safeguard a portion of their regular income in accessible and beneficial emergency fund options.

Where should you maintain an emergency fund? (Representative Image)

An emergency fund is the financial cushion you require during stressful and uncertain times to sustain your existing livelihood and safeguard your family’s needs and interests. In India, due to rising inflation and other economic challenges, low-income and middle-class citizens are often just a medical bill or job loss away from facing poverty. An emergency fund helps you shield against such unforeseen events, helping you stay afloat despite paying for medical coverage and riding the wave during unemployment days.

Fortunately, bank customers and investors in India have the option to safeguard a portion of their regular income in accessible and beneficial emergency fund options such as savings accounts, fixed deposits and post office schemes. Here is what you should know before determining the best option among the three for yourself.

Saving Accounts: Easy Access But Moderate Interest

Holding a savings account gives you easy access to your bank balance while earning moderate interest on the savings. Bank customers having a savings account can undergo the fastest transactions and fund transfers during emergencies using UPI, debit card and ATM facilities. While the interest earned on maintaining a savings account is quite low, customers also enjoy easy liquidity and a clean audit trail. However, you should keep track of the minimum balance rules during heavy withdrawals and you can also opt for a sweep-in facility provided by certain banks, where the surplus automatically moves into short-term deposits.

Fixed Deposits: Safety Plus Predictable Returns

Fixed Deposit is a financial instrument offered by the bank where customers can deposit a lump sum amount for a predetermined period at a fixed interest rate. FDs are known for their low risk value and predictable returns, making them a highly attractive option for those looking to ensure coverage during uncertain periods of life in the near future. But while safe and beneficial, FDs don’t provide easy access or liquidity. Premature withdrawal is only allowed after paying a small penalty or signing up for lower interest.

Post Office Scheme: Govt’s Safety, Workable Access

For those looking to maintain an emergency fund via a post office savings account or schemes, the government of India provides safety for the sum assured, stability on interest and multiple tax benefits. The accessibility and liquidity are also usually great, with account holders able to access their funds and make quick transactions during tough times. They also enjoy tax benefits on different schemes and quarterly interest payout.

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Rachel Reeves has declined to rule out raising income tax at next month’s Budget, according to reports.

The Chancellor has previously insisted that Labour’s manifesto commitment not to raise income tax, national insurance or VAT “stands” when questioned about how she will bridge a fiscal black hole in November.

But asked about reports the Treasury was considering an income tax hike, the BBC said Ms Reeves told reporters on Friday she would “continue to support working people by keeping their taxes as low as possible” but was still “going through the process” of writing the Budget.

The Chancellor said: “Although I can’t talk about individual measures at this stage, I understand that the cost of living is still people’s number one concern.”

Ms Reeves is widely expected to use the Budget to increase taxes once again, with the Institute for Fiscal Studies estimating she needs to find £22 billion of tax rises or spending cuts to meet her self-imposed fiscal rule.

The gap comes as a result of higher borrowing costs, weak growth and an expected downgrade to official productivity forecasts, although recent better-than-expected inflation figures have eased the pressure slightly.

Raising the basic rate of income tax by 1p could raise around £8 billion, but would break a clear manifesto pledge.

It would also be the first time the basic rate has been increased since the 1970s.

The Chancellor is also reported to be considering cutting the amount of money people can save in cash Isas as part of a drive to encourage investment in stocks and shares.

It is understood that no decision has yet been made and several options are being considered, including halving the allowance from £20,000 to £10,000.

Treasury minister Lucy Rigby told the Telegraph the Government was “looking at the right balance between cash and shares in the Isa”.

She said: “The bottom line is, we want people to be better off and one way we can do that is to build a shareholding democracy in this country.”

Meanwhile, The Times reported that the Chancellor would use the Budget to increase the minimum wage once again, and make further moves towards abolishing lower minimum wage rates for younger people.

The Social Security administration on Friday announced that its benefits will increase by 2.8% in 2026, giving retirees an average monthly boost of more than $56. The rise reflects moderating inflation after several years of higher cost-of-living adjustments (COLA).The increase will take effect in January for nearly 71 million Social Security recipients, while about 7.5 million people receiving Supplemental Security Income will see higher payments starting December 31.The announcement, which was scheduled for last week, was delayed due to the US federal government shutdown.Recipients saw a 2.5% increase in 2025 and a 3.2% rise in 2024, following a historic 8.7% jump in 2023 driven by record-high inflation. The COLA is funded by payroll taxes collected from workers and employers, up to an annual salary cap that will rise to $184,500 in 2026 from $176,100 in 2025.Social Security Administration Commissioner Frank Bisignano said in a statement that the annual adjustment “is one way we are working to make sure benefits reflect today’s economic realities and continue to provide a foundation of security.” However, many seniors believe the increase won’t be enough to meet rising living costs, reported AP.Polling from AARP shows that many older Americans share that concern. Only 22% of Americans over 50 believe a COLA of around 3% is enough to keep up with inflation, while 77% disagree. According to the MIT Living Wage Calculator, a single adult living in Florence, South Carolina, spends about $10,184 annually on housing, $3,053 on medical expenses and $3,839 on food.Emerson Sprick, director of retirement and labor policy at the Bipartisan Policy Center, said in a statement that cost-of-living increases “can’t solve all the financial challenges households face or all the shortcomings of the program.”The latest adjustment comes as the Social Security Administration faces internal challenges and uncertainty about the program’s long-term future. In July, Treasury Secretary Scott Bessent said the Republican administration was committed to protecting Social Security, hours after comments suggesting that a new children’s savings program signed by President Donald Trump was “a back door for privatising Social Security,” as quoted by AP.