Emergency Fund: Why You Need One

An emergency fund is a financial safety net that covers unexpected expenses. It protects you from debt and financial stress.

1. What is an Emergency Fund?

It’s a dedicated savings account to cover unforeseen costs like medical bills, car repairs, or job loss.

2. How Much Should You Save?

Aim for 3–6 months of living expenses. This gives sufficient cushion during emergencies.

3. Where to Keep the Fund?

Use high-yield savings accounts or money market accounts for liquidity and growth.

4. Benefits of an Emergency Fund

• Reduces reliance on credit cards.
• Provides peace of mind.
• Helps avoid panic financial decisions.

5. How to Build It?

Start small, contribute regularly, and treat it as untouchable except for emergencies.

6. Common Mistakes

• Using it for non-emergencies.
• Not contributing regularly.
• Keeping it in low-interest accounts.

Conclusion

An emergency fund is a financial lifesaver. Building it gradually and managing it wisely ensures stability and protects you from unexpected financial shocks.