Emergency fund
Cash held in an accessible account to cover unexpected costs or a loss of income, kept separate from savings earmarked for planned spending.
An emergency fund exists so that one bad event does not become a debt. A job loss, a medical bill, a car that needs a repair that cannot wait: each arrives without notice, and the alternative to holding cash is usually a card balance at a rate nobody chose. It is measured in months of essential outgoings rather than months of income, because essential outgoings are what has to keep being paid.
Sizing starts from fixed costs plus the food and transport that cannot be skipped. A widely used starting point is three to six months of that figure, larger where income is irregular or commission-based, smaller where two stable incomes cover the same household. Treat it as a range to reason from rather than a rule, since the right answer depends on how quickly income could be replaced and what cover already exists.
Two habits undo it. The first is investing the money: this balance is insurance rather than a return-seeking holding, and the moment it is needed is exactly when markets are most likely to be down. The second is not refilling it. Spending the fund on a real emergency is the fund working, but unless rebuilding it goes back into the budget as its own line, the next surprise arrives with nothing behind it.