If you are able to save any money after your expenses each month, it may be tempting to use that money to pay down a debt, or invest it so it can grow. However, it is important to prepare for an emergency expense. You never know when you will need to pay for an out of pocket medical expense, a car repair, a home repair, or something else that you simply didn't expect. Even worse, if you suddenly lose your job, you need a way to pay able to pay rent or the mortgage payment so that you can continue living in the same place while you search for your next job.
This is why it is important to keep an emergency fund and to build it before you move on to most other goals.
Many recommendations suggest that you save 3-6 months of living expenses in an emergency fund. This means that if you add up all of the things you need to pay for every month, such as food, rent, clothing, and transportation, try to save 3 to 6 times that much. This way, if you lost your job, you could support yourself during a 3-6 month job search. Or if another expense comes up, you can expect you'll have significant funds to cover it, hopefully with some left over while you build the fund back up.
This can be a lot of money, and a challenge to save this much. Especially if you have other high interest debts you want to pay off. You should always consider your next best alternative to determine how much of an emergency fund you need to keep when you are determining how large of an emergency fund you need.
If you do not have an emergency fund, and an urgent car repair or medical expense comes up, what will you do? If you borrow money from someone else, you might be able to take some time paying it back and not incur a large cost. If you would need to charge that expense on a credit card or personal loan, however, this can be far more costly, as you might have to pay this back at a 22% interest rate! Not having an emergency fund can be expensive far beyond the cost of the emergency itself.