What defines a financial emergency?

A financial emergency is characterized by an unexpected situation that requires immediate attention and often demands quick access to funds. This could involve events such as medical emergencies, sudden home repairs, or job loss, which typically arise without prior warning and can lead to significant financial strain if not addressed promptly.

Anticipated expenses, regular bills, or even financial opportunities that can be delayed do not fit the definition of a financial emergency because they can be planned for or managed over time. A financial emergency specifically refers to those unforeseen events that must be handled immediately to prevent further negative consequences, which underscores the importance of having an emergency fund set aside for such situations.