An emergency fund is the foundational safety net many planners recommend before allocating significant money to big milestones. The practical idea: set aside liquid cash that covers several months of basic living expenses (rent or mortgage, utilities, groceries, minimum debt payments) so that an unexpected job loss, medical bill, or major repair won’t force you to derail longer-term plans. Behavioral advantages are key — having a labeled, hard-to-touch account reduces the temptation to raid milestone savings when short-term wants arise. A common starter target is 3 months of essential expenses for people with stable jobs; people with variable income, dependents, or higher fixed obligations often aim for 6 months or more. The fund should be in a safe, liquid vehicle (high-yield savings account or money market), not tied up in investments that might be down when you need cash. Building the fund can be automated: set a modest recurring transfer timed with paydays and treat it like a fixed expense. This makes consistent progress likely without relying on willpower.

Once the emergency buffer is established, you can more confidently tackle milestone savings (down payments, college funds) because you’ve reduced the risk of needing to withdraw those earmarked funds for immediate crises. If cash is especially tight, prioritize a smaller “starter” emergency fund (e.g., $1,000) immediately while gradually scaling to a multi-month target. Reassess the size of the fund after life changes (new job, child, mortgage) — your required coverage may grow. Finally, avoid using emergency savings for discretionary things; instead, maintain a separate “sinking fund” for predictable non-monthly expenses (car maintenance, insurance deductibles) so the emergency fund remains intact for true emergencies. This sequencing prevents high-cost outcomes (credit-card borrowing, missed mortgage payments) that would otherwise slow or sabotage milestone progress.