What is the primary danger of not having an emergency fund?

The primary danger of not having an emergency fund is that it significantly increases the likelihood of incurring debt during emergencies. An emergency fund serves as a financial safety net, allowing individuals to cover unexpected expenses—such as medical bills, car repairs, or job loss—without having to rely on credit cards or loans. When faced with sudden financial challenges, those without an emergency fund may resort to borrowing money, leading to increased debt levels and potential financial strain. This can create a cycle of borrowing that may be difficult to escape and can adversely affect their overall financial health.

While the inability to invest in new opportunities and loss of investment potential are valid concerns, they are secondary to the immediate need for financial stability during crises. Likewise, lower credit scores may result from excessive borrowing, but the direct consequence of not having an emergency fund primarily pertains to the risk of accruing debt in times of need.