What is the purpose of an emergency fund?

An emergency fund serves a vital financial purpose by providing a safety net for unexpected expenses that can arise in life, such as medical emergencies, car repairs, or job loss. The primary goal of having this reserve is to maintain financial stability during unforeseen circumstances without relying on high-interest debt, like credit cards or loans. By having accessible cash, individuals can manage these unexpected costs promptly, reducing stress and ensuring that they can continue meeting their important financial obligations. This proactive financial strategy helps prevent a small issue from becoming a larger financial crisis.