What Is An Emergency Fund?

An emergency fund is simply a money market or savings account where you keep a specified amount of money to cover expenses in a real emergency.

A rule of thumb would be 3-6 months of your monthly expenses, to be set aside to be this fund.

Before you embark on building a financial plan, you need to set up an emergency fund, which will act as a cushion and protect you from financial troubles such as out of a job.

I spread out my emergency fund. I have a fixed amount in my savings account which I can withdraw should any real need arises. I have the remaining amount in a money market, which allows me to earn slightly higher interest rate than a normal savings account. However, it would take a couple of working days before I can liquidate it. In addition, there is easy credit from the banks but of course, this would be the last resort due to the hefty interest rate imposed.