emergency fund

An emergency fund is a savings reserve set aside specifically for unexpected expenses or financial crises, such as medical emergencies, car repairs, or job loss. Ideally, it should cover three to six months' worth of living expenses, providing a financial cushion that helps you avoid debt during tough times. By having this fund, you can handle unforeseen challenges without disrupting your financial stability or using credit. Building an emergency fund is a key component of good financial planning and promotes peace of mind.