An Emergency Fund is a cash reserve that is specifically set aside for unplanned expenses of financial emergencies. Financial emergencies, by their nature, are unpredictable, but do I really need one if I have credit cards with a large open to buy?
When an emergencies happen, they can derail your financial stability. A sudden illness or accident, unexpected job loss, or even a surprise home or car repair can devastate your family's day-to-day cash flow if you are not prepared.
While an emergency fund will not solve all your money problems, it is a great start to getting your finances headed in the right direction. Even if you can't imagine a scenario where you would need rescuing, remember; anything can happen. Aside from financial stability, there are other pros to having an emergency reserve of cash.
Saving money at any time isn't always easy, but it is easier to save when you can do it without stress. In addition, it is less painful than the alternatives like having unpaid medical bills and dealing with collection calls; additional interest and fees on your credit cards and checking accounts; taking money from your retirement nest egg.
Bottom Line-an emergency fund is the backbone of a strong personal financial plan.