What is one major risk of not having an emergency fund?

An emergency fund serves as a financial safety net designed to cover unexpected expenses such as medical bills, car repairs, or job loss. Not having an emergency fund increases your vulnerability to unforeseen financial challenges because you would need to rely on credit cards or loans to cover these costs, which can lead to debt accumulation and financial stress.

Without this cushion, a single unexpected event can derail your financial stability, leading to potential long-term consequences such as negative credit impacts or an inability to meet ongoing financial obligations. Therefore, the absence of an emergency fund makes individuals more susceptible to the financial shocks that life can present, emphasizing the importance of preparing for emergencies in advance.