What is the importance of having an emergency fund?

Having an emergency fund is crucial for anyone's financial stability and security, especially in India, where unforeseen situations such as health emergencies or sudden job loss can quickly drain one's savings. An emergency fund is a dedicated amount of money set aside specifically to cover unexpected expenses or emergencies that cannot be covered by regular income or other savings.

An emergency fund can help you avoid taking on debt to pay for unexpected expenses, protect you from financial hardship during emergencies, and give you peace of mind knowing that you have a safety net in place. It is generally recommended to have at least three to six months' worth of living expenses saved in an emergency fund, but the exact amount can vary depending on your individual circumstances.