Which choice or choices best describes the purpose of an emergency fund?

Which choice or choices best describes the purpose of an emergency fund?

A) An emergency fund prepares you for unexpected expenses.

B) An emergency fund keeps you from borrowing money from friends and family.

C) An emergency fund removes the worry about expenses not in the budget.

D) All of the above are good reasons to have an emergency fund.

Answer – A) An emergency fund prepares you for unexpected expenses.

Emergency fund can be considered as a savings account that has been formed mainly for covering the unplanned or unexpected expenses that can include the job losses, medical emergencies or the unexpected financial issues. The emergency fund can prepare the individuals for the unexpected expenses so that they do not need to borrow money from their friends or family. The fund helps in removing the worries that individuals can have related to the expenses that were not a part of their budget. The emergency fund can be considered as the cash reserve that is mainly kept for fulfilling the unplanned expenses or the financial emergencies. The emergency savings can be effectively used for the small or large unplanned payments or bills. The unplanned expenses are mainly not a part of the budget or the monthly expenses that have been decided by the individuals. The amount that needs to be kept within the emergency fund is mainly dependent on the situation being faced by the individuals. Emergency funds can be developed by the individuals by even setting aside small amounts of money. The strategy of savings that is implemented by the individuals is considered to be an important factor that can help the individuals to gain success based on development of the emergency funds. The strategies that can be used by individuals for starting the savings process are important for increasing their ability based on solving the emergency issues and fulfilling the unwanted expenses as well. The importance of emergency funds is considered to be quite high for the individuals to reduce the issues that can be faced by them during the unplanned situations.