Emergency Fund Definition

An emergency fund is a type of medium term savings account where the assets are held in a manner that makes them easily assessable. Examples would include a savings or money market account, or a short-term certificate of deposit, at a local credit union or bank. Emergency funds should not be used for normal transactions-rather, they should be contributed to on a regular basis and allowed to grow so that the funds will be available in case of an unforeseen event such as a local catastrophe, medical emergency, or unemployment. If the emergency funds are not used they can always be used at retirement. Most financial experts suggest that about 10% of net income should be set aside into an emergency fund.