Planning

Emergency Fund

Definition

Cash savings covering 3-6 months of living expenses, kept in a high-yield savings account for unexpected costs. Most financial advisors recommend building an emergency fund before investing in the stock market.

Related Terms

Liquidity

How easily an asset can be converted to cash without significantly affecting its price. Stocks of large companies are highly liquid. Real estate and private equity are illiquid. Cash is the most liquid asset.

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