What is an emergency fund and how much do I need?

An emergency fund is money set aside specifically to cover unexpected expenses or financial disruptions, like job loss, medical bills, car repairs, or home emergencies. It acts as a financial safety net so you don't have to go into debt when something unexpected happens. The money should be kept in an easily accessible account, like a high-yield savings account, not invested in stocks or tied up in assets. Most financial experts recommend saving three to six months of living expenses. If you have a stable job and few dependents, three months may be sufficient. If you're self-employed, have variable income, or support a family, aim for six months or more. Start small if needed, even $1,000 provides a basic cushion while you build toward a fuller fund.