Definition of Emergency fund:
Money which is set aside for an emergency situation, such as unexpected unemployment or injury, or a natural disaster which destroys ones home and belongings. Having an emergency fund should be part of any individual or familys disaster plan. Emergency funds should be kept in a safe but easily accessible place, such as a savings account. The typical suggestion for an emergency fund is to have saved the equivalent of at least three months worth of living expenses.
An emergency fund should contain enough money to cover between three and six months’ worth of expenses, according to most financial planners. Note that financial institutions do not carry accounts labeled as emergency funds. Rather, the onus falls on an individual to set up this type of account and earmark it as capital reserved for personal financial crises.
An emergency fund is a readily available source of assets to help people navigate financial dilemmas, such as the loss of a job, a debilitating illness, a major repair to home or car—not to mention the kind of major national crisis the coronavirus pandemic has created. The purpose of the fund is to improve financial security by creating a safety net of cash or other highly liquid assets that can be used to meet emergency expenses. It also reduces the need to either draw from high-interest debt options—such as credit cards or unsecured loans—or undermine your future security by tapping retirement funds.
How to use Emergency fund in a sentence?
- Financial planners recommend that emergency funds should typically have three to six months' worth of expenses in the form of highly liquid assets.
- Savers can use tax refunds and other windfalls to build up their fund.
- An emergency fund is a financial safety net for future mishaps and/or unexpected expenses.
Meaning of Emergency fund & Emergency fund Definition