An Emergency Fund: Why You Need One and How to Make One

 

There are many different building blocks you need to establish a foundation for financial security. One of the most important is an emergency fund. An emergency fund ensures you’re prepared for unexpected expenses so you don’t find yourself in debt — or worse — because of a lack of money when you need it.

While most people have heard they need an emergency fund, the majority of Americans don’t actually have one. If you’re lacking an emergency fund, you’ve come to the right place. Read on to find out everything you need to know about creating an emergency fund to serve as a safety net and give you peace of mind.

Young man with money flying out of his wallet

What is an emergency fund?

An emergency fund is money you’ve set aside that you can quickly access to cover an unexpected problem. It’s money earmarked for expenses that come up that you must pay.

It exists separately from retirement savings and from a savings account that you may have for a specific purpose, such as a vacation fund or a down-payment fund. When you create an emergency fund, the hope is that you’ll never need the money — but it will be there for you when you inevitably do.

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