An emergency fund is a rainy-day fund. It’s for unexpected life events like a job loss, a pregnancy, a car transmission going out, and so on. It’s not an investment or an account to save up for that trip to the Bahamas! Baby Step 1 is to save $1,000 as a starter emergency fund. A fully funded emergency fund is 3–6 months of your personal expenses set aside in a savings or money market account. You’ll build this up in Baby Step 3.
Read more about emergency funds here.