The term "emergency fund" is too restrictive because it considers only emergencies, which are events that require immediate (financial) intervention. These events exclude crisis events that aren't quite emergencies meaning they may or may not require immediate intervention as an emergency does. Crises do require planning in order to assess risk and mitigate their impact. The term emergency fund also implies that it's solely a "pot of money" that's put into the bank and left there until needed.
We use the term Crisis and Emergency Resource Plan (CERP). It's not just a savings account stashed away for future, unforeseen events. It's your plan for having the means to fund crises and a methodology to do so. The CERP is highly tailorable to your needs. It does require some thought and effort, but the result is far better than a traditional emergency fund.
Too many financial celebrities focus only on the bank account with "3 to 6 months of emergency living expenses" and ignore the more-complex issues of a crisis/emergency. Having money to account for a job loss is a good start (especially if you have nothing), but a job loss is only one of two money-related crises/emergencies.
The first type of crisis is known as supply-side, which means you've lost income, typically a job loss or transfer to a lower-paying job. The second type of crisis is demand-side, which means you've experienced something that requires you to use your savings to resolve. This could be anything from a house fire, car wreck, insurance premiums, etc. This is what Ramsey and other financial celebrities ignore. They focus only on supply-side emergencies, which means that 3-month emergency fund won't last 3 months if you have a broken HVAC system or a house fire that requires you to live in a hotel and pay insurance deductibles while you're unemployed. The level of risk associated with this way of thinking is unacceptably high.
The Crisis and Emergency Resource Plan (CERP) includes not only supply-side and demand-side crises, but also the methods on how to fund them. "Cash on hand" is only part of the CERP. Lines of credit that can be easily accessed (i.e., credit cards, pre-approved loans) are also part of the CERP.
The Stone Money Foundations specifies three phases of the CERP: 1) establish a small emergency fund, 2) intermediate CERP, and 3) full implementation of the CERP. We do use the term "emergency fund" exclusively for Phase I because this is at the beginning of your debt payoff, so it's likely you will have only a few thousand dollars or some credit cards that still have credit available. Your CERP won't be robust in the beginning, so it is more of an emergency fund in the classic sense. After you pay off critical debts, you'll have more flexibility to further develop your CERP in terms of funding and methodology. Depending on your situation, you may have Phase II or Phase III of your CERP already in place. We generally don't advise using an established emergency fund or CERP to pay debt. This is a math problem that needs to be solved. Security sometimes trumps interest rates.
We'll discuss the CERP in more detail in future posts, but you already realize that the traditional emergency fund touted by financial celebrities is woefully inadequate. The impact of crises and emergencies is diminished through the execution of a viable plan--your Crisis and Emergency Resource Plan.