Emergency Fund — Financial Glossary

Definition: A cash reserve set aside for unexpected expenses or financial emergencies, typically 3–6 months of living expenses.

What is an emergency fund?

An emergency fund is money set aside specifically for unexpected expenses — job loss, medical bills, car repairs, or home emergencies. Financial experts recommend saving 3 to 6 months of essential living expenses.

Where to keep it

Your emergency fund should be in a liquid, easily accessible account — ideally a high-yield savings account. You want to earn interest on it while keeping it available at a moment's notice.

How to build one

  1. Calculate your monthly essential expenses
  2. Set a target (3–6 months' worth)
  3. Automate monthly contributions
  4. Keep it in a separate high-yield savings account

Use our Savings Calculator to plan how long it will take to build your emergency fund.