Emergency Fund

The term emergency fund refers to money stashed away that people can use in times of financial distress. The purpose of an emergency fund is to improve financial security by creating a safety net that can be used to meet emergency expenses, such as an illness or major home repairs. Assets in an emergency fund tend to be cash or other highly liquid assets. This reduces the need to either draw from high-interest debt options, such as credit cards or unsecured loans, or the need to undermine your future security by tapping into retirement funds.

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