Emergency Fund
A cash reserve covering 3\u20136 months of essential expenses, held in a liquid account, before pursuing market-risk investments. It prevents you from selling investments at bad times when unexpected expenses arise \u2014 a job loss, medical bill, or car repair. The exact sequencing varies \u2014 some advisors prioritize capturing an employer 401(k) match (high implicit return) before completing the fund; some advocate a smaller starter buffer while paying down high-interest debt. The shared insight: liquid reserves prevent forced selling at bad prices.
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Related terms
Adjusted Cost Basis · Annuity · Capital Gains Distribution · Capitalized Interest · Cost Basis · Dividend Discount Model (DDM)
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