An emergency fund is a financial safety net that individuals or families set aside to cover unexpected expenses or emergencies.

This fund typically consists of a cash reserve that can be easily accessed, such as a savings account or money market account. The amount of money in an emergency fund varies depending on individual circumstances, but a common recommendation is to have three to six months’ worth of living expenses saved.

The purpose of an emergency fund is to help cover unexpected expenses, such as a sudden job loss, medical emergency, or unexpected home repair, without having to rely on credit cards or other forms of borrowing.

By having an emergency fund, individuals or families can better manage unexpected financial challenges and avoid falling into debt or financial hardship.