Emergency Fund
Cash set aside specifically to cover unexpected expenses without going into debt.
An emergency fund is liquid savings kept separate from everyday spending and long-term investing, sized to cover a stretch of essential expenses — typically 3 to 6 months, more if income is unpredictable. Its job isn't to grow; it's to be there, in cash, when a job loss, medical bill, or major repair hits.
Worked Example
Someone with $3,500 in essential monthly expenses (rent, food, utilities, insurance, minimum debt payments) would target roughly $10,500–$21,000 in an emergency fund, depending on how stable their income is.
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