What is the purpose of an emergency fund?

An emergency fund is specifically designed to provide financial security in situations where unexpected expenses arise. This could include medical emergencies, car repairs, home maintenance issues, or sudden job loss. The primary goal of an emergency fund is to ensure that you have cash available to manage these unforeseen circumstances without resorting to debt or disrupting your regular financial obligations.

Choose to prioritize liquidity and accessibility in an emergency fund, as the foundational concept is immediate access to cash when emergencies occur. This safety net helps reduce financial stress and provides peace of mind knowing that funds are available when they are needed the most. By having this separate stash of money, one can navigate life's unpredictabilities more effectively.