Definition
Savings set aside for unexpected expenses or financial emergencies. It’s your financial cushion for tough times.
What to consider
- Set aside money to cover unexpected expenses like car repairs or medical bills.
- Keep it in a readily accessible account.
- Regularly add to it so it grows with your needs.
Real world scenarios
- Following a sudden job layoff, Gia relies on her emergency fund to cover rent and groceries, easing the pressure of finding new work.
- Damien sets a goal of saving three months of expenses in an emergency fund. He reaches it by cutting subscriptions and eating out less.
- A surprise car breakdown doesn’t force Sabrina into debt. She pays the repair costs from her emergency stash and immediately starts rebuilding it.
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