An Emergency Fund is the liquid cash savings that you set aside for large unexpected expenses and emergencies. This account will help protect you from a disruption in your income or if you incur any major expenses, such as damage to your car or medical bills. Ideally, your Emergency Fund should be held in a secure high yield savings account that is separate from the money you use for daily transactions.

An Emergency Fund can also help you to avoid having to liquidate long-term investments, such as a 401(k) or stocks, which can have immediate tax implications and long-term financial consequences.

Moreover, having an emergency savings fund can give you peace of mind and financial security knowing that you have a reserve to fall back on in case of an emergency. It allows you to make better financial decisions, rather than making them out of panic or fear.

Overall, having an emergency savings fund is an essential part of a solid financial plan, helping you prepare for unexpected events and ensuring your financial security.