Definition

A reserve of money set aside for unexpected expenses or emergencies. It acts as a backup to cover costs that insurance might not fully handle.

What to consider

  • Set aside funds equal to several months of expenses.
  • Keep the funds liquid and accessible.
  • Review and adjust the fund periodically.

Real world scenarios

  • An employee maintained an emergency savings fund separate from regular savings to cover unexpected bills.
  • A family built an emergency savings fund to provide a buffer during financial crises.
  • A small business set aside an emergency savings fund for unforeseen downturns.

Related terms

Insurance & Financial Protection