Liquid funds are debt mutual funds that invest your money in very short-term market instruments such as treasury bills, government securities and call money.

These funds can invest in instruments up to a maturity of 91 days liquid funds are used by investors to park their money for short periods of time typically 1 day to 3 months.

Liquid funds could also be used when you have a sudden influx of cash, which could be a huge bonus, sale of real estate and so on.