Emergency Fund
A cash cushion set aside for unexpected expenses like repairs, job loss or medical bills.
What Emergency Fund means
An emergency fund is money kept in a safe, accessible account (like a high-yield savings account) for surprise costs and income gaps. It exists so that a broken car, an urgent bill or a few months without work doesn't push you onto credit cards or high-interest debt. A common starting target is one month of essential expenses, building toward three to six months as your situation allows. It is a foundation step in most budgeting advice.
Example
If your essential monthly expenses are $2,500 and you aim for three months, your target is $7,500. Reaching it by saving $300 a month would take about 25 months.
Disclaimer
Definitions are simplified for educational use and are not personalized financial, investment, tax or legal advice.