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Emergency Fund
Money set aside in cash for surprise expenses, so a bad month does not turn into a real crisis.
Example
Your family keeps three months of bills as savings in a separate account. The fridge breaks. They pay for the new one out of that savings, top it back up over the next few months, and never reach for a credit card.
How it fits in
An emergency fund of three to six months of essential spending is one of the most useful pieces of financial infrastructure a household has. Without one, a normal setback (lost job, car repair, medical bill) becomes a crisis that gets paid for with expensive debt. With one, the same setback is just a problem that gets handled and forgotten in a few months.
Where this is taught
Related terms
When the money you earn from saving starts earning its own money on top.
Interest paid only on the original amount, never on the interest you have already earned.
Needs are the things that keep you safe and well. Wants make life nicer. Mixing them up is what empties most budgets.