emergency fund

An emergency fund is a larger version of your rainy day fund. It’s there to cover larger, longer term unexpected expenses like the loss of a job, or unexpected medical bills. Since it’s meant to cover bigger needs, it should be larger; somewhere between 3-6 months of necessary expenses is commonly recommended. Because you never know when you’ll need this money, it’s best to keep it somewhere safe, quickly accessible, and stable. A dedicated savings or money market account is the simplest option.