Question

Which option describes an emergency fund?

Answer 1

An emergency fund is a savings account specifically set aside to cover unexpected expenses or financial emergencies. It is typically used for situations such as medical emergencies, car repairs, job loss, or urgent home repairs. An emergency fund is typically recommended to include three to six months' worth of living expenses, allowing individuals to manage unforeseen costs without resorting to high-interest debt. This fund should be kept in a easily accessible account, such as a high-yield savings account, to ensure quick access when needed.