An emergency fund is a reserve of funds that you set aside for unexpected financial emergencies. It is an essential part of any sound financial plan, as it provides a buffer to help you weather unexpected expenses without resorting to debt or other forms of borrowing. Emergency funds are typically kept in a savings account or a money market account, where they are easily accessible in case of emergency.

Experts recommend that you have at least three to six months’ worth of living expenses saved in your emergency fund. The exact amount you need will depend on your personal circumstances, such as your job stability, income level, and number of dependents. In addition, it’s important to regularly review and update your emergency fund as your circumstances change.