An emergency fund is for the unexpected, according to a Barron's Top 100 financial adviser and the director of consumer education for FreeScore.com. For example, appliances that stop working, getting laid off from a job, a long illness or an accident. You use an emergency fund for any expense you cannot foresee.
One of the most common problems people have with emergency funds is forgetting to plan for one-time expenses each year.
People budget to save and put away an emergency fund, then they forget to budget for an annual insurance expense or car expenses, etc. You can foresee your car insurance expense next November, for example, so it is not an emergency.