Emergency Fund

An emergency fund is cash set aside for life's surprises — job loss, car repairs, medical bills. Three to six months of expenses in a savings account is the standard target. It exists for one reason: so that surprises don't turn into high-interest credit-card debt.

Example: Spend $4,000 a month? Aim for $12,000–$24,000 parked in a high-yield savings account, separate from checking.