The settings file is never created automatically, you must create it yourself, whether you use embedded or "real" maven.
Create it at the following location <your home folder>/.m2/settings.xml
e.g. C:\Users\YourUserName\.m2\settings.xml on Windows or /home/YourUserName/.m2/settings.xml on Linux
Here's an empty skeleton you can use:
<settings xmlns="http://maven.apache.org/SETTINGS/1.0.0"
xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
xsi:schemaLocation="http://maven.apache.org/SETTINGS/1.0.0
http://maven.apache.org/xsd/settings-1.0.0.xsd">
<localRepository/>
<interactiveMode/>
<usePluginRegistry/>
<offline/>
<pluginGroups/>
<servers/>
<mirrors/>
<proxies/>
<profiles/>
<activeProfiles/>
</settings>
If you use Eclipse to edit it, it will give you auto-completion when editing it.
And here's the Maven settings.xml Reference page