Cash set aside specifically to cover a sudden job loss, medical bill, or unexpected expense.
An emergency fund is money set aside in an easily accessible account, specifically meant to cover a sudden, unplanned expense, a job loss, a medical bill, an urgent car repair, without having to go into debt or sell investments at a bad time to cover it. Financial advisors commonly recommend keeping three to six months of essential expenses in one, though the right number depends heavily on how stable someone's income and job security actually are. It's less about growing wealth and more about having a buffer so one bad month doesn't turn into a financial crisis.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.