Your Net WorthGlossary
Emergency fund
An emergency fund is cash set aside to cover essential expenses if your income stops or an unexpected cost hits.
Most guides suggest three to six months of essential spending held somewhere safe and accessible. That usually means an easy-access savings account in the UK or a high-yield savings account in the US, not investments that could fall when you need the money.
The fund is for true emergencies: job loss, urgent home repairs, medical bills, or a car failure that lets you keep earning. It is not for planned spending like holidays or Christmas.
Build it before you aggressively invest or overpay low-rate debt. Once it is in place, you can redirect the same monthly amount to longer-term goals.