An emergency fund is a savings account set aside specifically for unexpected expenses, such as medical bills, car repairs, or job loss. It acts as a financial safety net, helping individuals avoid debt when emergencies arise. Financial experts often recommend saving three to six months' worth of living expenses in this fund. Building an emergency fund involves setting aside a portion of your income regularly. This can be done through automatic transfers to a separate savings account. Having an emergency fund provides peace of mind and financial stability, allowing individuals to handle unforeseen situations without stress.