Glossary
Emergency Fund
An emergency fund is a savings reserve set aside to cover unexpected expenses such as medical bills, car repairs, or job loss. It acts as a financial safety net and helps prevent the need to rely on credit cards or loans during emergencies.
How much should I have in an emergency fund?
A common rule of thumb is to save 3–6 months’ worth of living expenses, though more may be needed depending on your job security, health, and family size.
Where should I keep my emergency fund?
Store it in a liquid, easily accessible account like a high-yield savings account or money market account—not in investments that can lose value.
What counts as an emergency?
True emergencies include medical expenses, job loss, urgent home or car repairs, or unexpected family needs—not planned expenses like vacations or holiday gifts.
How do I start an emergency fund?
Start small by setting aside a fixed amount from each paycheck. Automating savings and gradually building toward your goal can make it more manageable.
Can I invest my emergency fund?
It’s not recommended. Emergency funds should be safe and accessible, not subject to market risk or withdrawal penalties.
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