Why is it important to have an emergency fund?

Having an emergency fund is crucial primarily because it provides a financial safety net to cover unexpected expenses. Life can be unpredictable, and unplanned events such as medical emergencies, car repairs, or sudden job loss can lead to significant financial stress. An emergency fund allows individuals to address these situations without resorting to debt or sacrificing their long-term savings.

By having readily accessible funds set aside specifically for emergencies, people can maintain their financial stability and avoid the pitfalls of high-interest loans or credit card debt that may arise when trying to cover unexpected costs. This financial cushion ensures that they can handle unforeseen circumstances without derailing their overall financial objectives.