What Is an Emergency Fund, and Why Do You Need One?

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When you first start working out your overall budget, it’s normal to include calculations for the obvious things like rent, student loan payments and even groceries. But there’s another important provision you’ll want to add to the list that might not be as straightforward: an emergency fund. It’s impossible to anticipate unexpected expenses in your life, but having money set aside specifically for this purpose — money that isn’t already allocated to other bills — can make the difference in weathering an emergency smoothly or setting yourself up for financial difficulties down the road.

Emergency funds are great safety nets to have, not only for your financial stability but also for your own peace of mind. If you don’t have one yet, find out why an emergency fund should be a part of your budget — and how you can build your own.