An emergency fund is money we set aside to be used in the case of an emergency. An emergency may be losing or being laid off from a job, or an injury that does not allow us to work for a time, maybe a car breaking down or a medical emergency with high costs. A good recommendation is that we have enough in an emergency fund to cover living expenses for three to six months. This money is usually held in a liquid account such as a passbook savings or money market account.
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