What is a consequence of not having an emergency fund?

Not having an emergency fund significantly increases the likelihood of incurring debt during financial emergencies. An emergency fund serves as a financial safety net that allows individuals to cover unexpected expenses—such as medical bills, car repairs, or job loss—without resorting to credit cards or loans. Without this cushion, individuals may find themselves in situations where they must borrow money to address urgent needs, leading to increased debt and potential financial strain. In contrast to having an emergency fund, relying on credit for unexpected expenses can create a cycle of debt that is difficult to escape. Establishing an emergency fund is a fundamental principle of sound financial management, promoting stability and reducing the risks associated with unplanned financial challenges.