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We will eventually face unanticipated financial emergencies, whether it be a minor car accident, an unexpected medical bill, a broken appliance, a loss of income, or even a damaged cell phone. Whether they are large or small, it can feel as though these unanticipated bills come at the worst possible times.

An essential step to safeguard yourself against financial emergencies is establishing a savings account or an emergency fund, which is also one of the first actions you can take to begin saving money. You will be able to recover from these unanticipated expenses more quickly and get back on track to achieving your larger savings objectives if you have some money set aside for them, even if it’s just a tiny amount.

Emergency Fund Explained

A cash reserve that has been intentionally set aside for unanticipated spending or financial emergencies is referred to as an emergency fund. Common causes of financial stress include the need for vehicle maintenance, home repairs, medical bills, or a reduction in income.

Emergency Fund Benefits

It should be no surprise that experiencing an emergency in life might put a danger on your financial well-being and cause you to feel stressed. If you don’t have a financial buffer, you’re living on the “financial” edge because you always try to make it through the month without hitting rock bottom. Having the peace of mind from being prepared with an emergency fund enables you to confidently face any of life’s unforeseen occurrences without adding anxieties about money to your to-do list.

Top Vanguard Emergency Funds

Vanguard has a large portfolio of funds for investment, including 500 index-based Vanguard funds. For Emergency Funds, the following are the most suitable:

Bottom Line

If you are prepared for unexpected expenses with a savings cushion, you won’t have to rely on other sources of credit or loans, which can lead to an accumulation of debt. Suppose you pay for these one-time emergency expenses using a credit card or take out a loan. In that case, the total amount you will owe could be substantially more than the amount you were initially charged because of interest and other penalties.