Definition
A reserve of money set aside to cover unexpected expenses.
Example
A restaurant owner sets aside $3,000 in an emergency fund to cover unforeseen costs like replacing a broken oven ($1,500) or repairing a refrigerator ($800). Having this fund ensures the restaurant can continue operations without disrupting service or taking on unnecessary debt.
Related Articles
- Learn more about Emergency Fund in this Beginner's guide on How to Create an Operating Budget for Your Small Business