What is an emergency fund?
An emergency fund is when you have money set aside that you do not touch !
Emergencies are unexpected and it covers things like things that your insurance may not cover and unexpected repair/damage.
Being proactive with saving ahead of time will stop you being reactive. Emergency funds are also there just in case you lose your job or something affects your business. This helps to avoid you seeking urgent help that is out of your control, especially with high interest rates for borrowing at a short notice can put you into an uncomfortable situation.
What is not an emergency?
Things that are require you to pay on a consistent basis is not an emergency as you have already accounted for it in your budget.
Here are some examples of emergencies:
Major health expense
Major dental expense
Emergency pet care
Unexpected tax bill
Your emergency fund needs to be very accessible. It is suggested that you have a separate account for your emergency fund.