An emergency fund can be both short and long term. A short-term fund is one that is highly liquid and easily accessible. Some of the best short-term avenues for short term funds are cash, savings bank account, liquid funds and short-term FDs. However, the interest rates are on the lower end for these investments. A long-term emergency fund gives a higher interest rate but ranks low on liquidity. You can invest in FDs with a tenure of up to 5 years for building a long-term fund but remember that this does not satisfy the need for liquidity which is important in an emergency fund.