What Is Emergency Fund? Meaning & Example
Definition
An emergency fund is cash set aside for unexpected expenses such as job loss, medical bills or urgent repairs. Many people aim for three to six months of essential expenses.
Related terms
A high-yield savings account pays a higher interest rate than a typical savings account, often from online banks. It is a popular home for emergency funds.
BudgetA budget is a plan for how you will spend, save and invest your income. It helps you direct money toward your priorities instead of wondering where it went.
LiquidityLiquidity describes how easily an asset can be bought or sold quickly without greatly moving its price. Highly liquid markets have many buyers and sellers and tight spreads.
What is Emergency Fund?
An emergency fund is cash set aside for unexpected expenses such as job loss, medical bills or urgent repairs. Many people aim for three to six months of essential expenses.
Can you give an example of Emergency Fund?
If essential costs are $2,500 a month, a three-month emergency fund would be $7,500.