Which term describes money saved specifically to cover unexpected costs or loss of income?

Which term describes money saved specifically to cover unexpected costs or loss of income?

• A. Direct Deposit
• B. Interest
• C. Emergency Fund
• D. Minimum Balance

Answer: (C)

Money saved specifically to cover unexpected costs or loss of income is called an emergency fund. The idea is to have readily accessible money you can use if something unplanned happens—like a medical bill, car repair, or a sudden job cut—without needing to borrow or sell investments. Because it should be easy to access, it’s typically kept in a liquid, low-risk account such as a savings account. Many financial guides suggest having enough to cover three to six months of essential living expenses, though the exact amount depends on personal circumstances. The other options don’t fit: direct deposit is how you receive pay, interest is the earnings on money saved or lent, and a minimum balance is the lowest amount you must keep in an account to avoid fees.

Money saved specifically to cover unexpected costs or loss of income is called an emergency fund. The idea is to have readily accessible money you can use if something unplanned happens—like a medical bill, car repair, or a sudden job cut—without needing to borrow or sell investments. Because it should be easy to access, it’s typically kept in a liquid, low-risk account such as a savings account. Many financial guides suggest having enough to cover three to six months of essential living expenses, though the exact amount depends on personal circumstances. The other options don’t fit: direct deposit is how you receive pay, interest is the earnings on money saved or lent, and a minimum balance is the lowest amount you must keep in an account to avoid fees.