An emergency fund is a crucial financial safety net that should be in place before you begin investing. It consists of easily accessible savings set aside to cover unexpected expenses or income loss, such as:

• Medical emergencies.
• Job loss.
• Urgent home or car repairs.

Why an Emergency Fund is Important:

1. Protects Your Investments: Without an emergency fund, you might be forced to sell investments during a market downturn to cover urgent expenses. This could lead to losses if you need to sell at an unfavorable time.
2. Financial Stability: Knowing you have a safety cushion allows you to invest with more confidence, focusing on long-term growth without worrying about short-term financial disruptions.
3. Avoids Debt: An emergency fund helps you avoid relying on credit cards or loans, which can come with high-interest rates and lead to further financial strain.

How Much to Set Aside:

It’s generally recommended to save 3 to 6 months’ worth of living expenses in your emergency fund. The exact amount depends on factors like job stability, dependents, and personal risk tolerance.

Where to Keep It:

Your emergency fund should be in a liquid and safe account, such as a:

• Cash ISA.
• High-interest savings account.
• Money market fund.

In summary, building an emergency fund before investing ensures you’re financially protected and reduces the need to tap into investments during unforeseen events.