Emergency fund
Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.
An emergency fund keeps a surprise bill from turning into credit card debt. It belongs somewhere safe and easy to reach, like a high-yield savings account, not in investments that can drop in value right when you need the money.
Start small. Even $500 to $1,000 covers many common surprises. Then build toward 3 to 6 months of essential expenses, or more if your income is uneven or you support others.
Example
If your essential costs are $2,500 a month, 3 months is $2,500 × 3 = $7,500 and 6 months is $2,500 × 6 = $15,000.