Emergency Fund
Definition
An emergency fund is money set aside for unexpected costs, held somewhere it can be reached quickly. Its job is to absorb a surprise without turning it into new debt.
Common guidance is several months of essential expenses, though what is achievable varies widely, and a smaller fund still does the job it exists for.
Accessibility matters more than return. Money locked away, or exposed to market movement, is not dependable at the moment it is needed.
It also interacts with debt. A modest fund alongside repayment can prevent the setback of borrowing again the first time something breaks.