3 Choices of Investment Instruments to Save Emergency Funds

Not a few people are worried about the news of a recession in 2023. The recession itself is a condition in which a country's economy experiences a slump for 2 consecutive quarters.

When a recession does occur, several impacts must be felt by everyone, such as the risk of layoffs, weakening economic and business activity, rising prices of goods, and so on.

To work around this, everyone is advised to have an emergency fund, which is a savings fund that can be used to meet urgent needs. Ideally, the emergency fund that should be collected is around 6 to 12 times spent each month.

For example, with monthly expenses reaching 2 million, this means you have to collect an emergency fund with a nominal value of 12 million to 24 million. With such a large amount, some people may be confused about how to collect it quickly.

No need to worry, you can collect emergency funds more optimally by investing in several selected instruments. As an option, here are 3 recommendations for investment instruments to collect emergency funds so that they are better prepared to face the risk of a recession.

What are the Instrument Criteria for Saving Emergency Funds?

Before discussing the choice of investment instruments to collect emergency funds, you need to first understand the criteria. In general, there are 4 criteria for suitable investment instruments as a place to store emergency funds, including:

Liquid

The first is having high liquidity. This is important to note so that the funds stored in investment instruments are easy to withdraw at any time needed. So, when financial problems confront you, you won't be bothered by the long process of disbursing investment funds.

Give Promising Yields

The second criterion is being able to provide promising returns. Even though the nominal varies, depending on the type of investment instrument chosen, make sure if there is an increase in the value of money from the capital invested in an investment product. Only then can the investment benefits be obtained optimally.

Minimal Risk

In addition, try to choose instruments that are free from the market or market risks. With low risk, it means that the movement of investment capital will be more stable and far from the risk of reducing the amount.

Affordable Admin Fee Burden

The last criterion, make sure the selected investment instrument has low administrative costs. The goal is that the value of the emergency fund is maintained and not eroded by these costs.

3 Choices of Investment Instruments to Save Emergency Funds

1. Money Market Mutual Funds

Now, after knowing the 4 investment instrument criteria above, you certainly understand what kind of product is worth choosing.

One of them is investing in money market mutual funds, which have the lowest level of risk compared to other types of mutual fund products.

Even though the fluctuation rate is small, the returns from this type of mutual fund are still attractive compared to regular bank deposits or savings.

In addition, the profits obtained from investment products are not taxable objects so they are more indulgent for investors.

Regarding liquidity, investor funds in this product can be disbursed within 1 working day after the transaction, the funds are requested for disbursement, and it only takes a few days for them to reach the investor's account.

Referring to the rules of the OJK or the Financial Services Authority, the maximum time required for disbursing money market mutual funds is 7 working days from the stock exchange. Another advantage, mutual fund investment can be started with small changes, starting from just 10 thousand.

2. Gold investment

Gold is often used as the prima donna for almost all investors because its value tends to increase every year. Thus, gold investment is suitable for collecting emergency funds because it can withstand the onslaught of inflation. In addition, the liquidity of this instrument is relatively high, making it easy to sell when needed.

Generally, gold investment is done by buying gold bullion. But, thanks to advances in technology, gold investment can now be done via several online applications by buying virtual gold. The capital to start this investment is even more affordable, starting from just 50 thousand.

3. Tradable Retail State Securities

Another investment instrument that is suitable as a place to store emergency funds is a tradable type of retail SBN, aka it can be traded. An example of this instrument is ORI022 which has a yield of 5.95 percent per year.

By buying these SBNs, investors can get regular income through coupons that are paid every month. Because it is guaranteed by the state, investing in this instrument can be said to be almost completely risk-free, making it ideal for saving emergency funds.

Strengthen Financial Conditions from Recession with Emergency Funds

Those are 3 investment instruments that are suitable as a place to save emergency funds. With a large enough nominal, saving emergency funds in the above investment instruments can make it accumulate faster. So, the financial condition is also better prepared to face the issue of a recession that will occur this year.