How to Decide If You Should Use Your Emergency Fund

Since I started my emergency fund in 2012, I’ve needed to draw on it several times (including within the past year!). The first few times I used it, I felt a twinge of guilt and fear to see that savings account balance fall. It always felt a little bit like a failure or losing some of the financial progress I’d gained.

But as I’ve reminded myself every time: it’s okay to spend your savings! And putting money toward the purpose you saved for, even if it is an emergency, isn’t a setback. It means your money management is going exactly as planned, and you get to benefit from your past responsible actions.

Getting clear on what exactly constituted an emergency also helped me know when to draw the line and live with a little discomfort — and when to use my emergency fund without hesitation. Personally, I define an emergency as any situation that poses a risk to your livelihood, health, or safety.

Following this guideline, here are some signs it might be time to put your emergency savings to use.

You’ve lost income

With no money coming in, or less than you need to cover your bills, it might be a better idea to tap emergency savings than, say, miss payments or have a bill go overdue.

Using savings to cover current expenses buys you time to find a new job or a way to supplement your income. An emergency fund can also be a crucial safety net for anyone with a variable income, who can use these funds to make sure they can still make ends meet in leaner months.

Don’t raid your emergency fund without looking for other sources of funds and assistance, though. Make sure you file for unemployment benefits through your state’s unemployment insurance program. These payments, even if they’re less than what you typically make, can cover costs and stretch your emergency fund further.

You have emergency repairs

After a huge windstorm recently damaged the electrical box on our home, I had to use some emergency savings for such a repair. We had to hire an electrician to replace and update our electrical setup, with the total coming in just over $3,000. That was under our homeowner’s insurance deductible, which meant we covered all of those costs out of pocket. Fortunately, we could cover it in cash with our emergency fund.

You might be in a similar situation. Maybe your car isn’t starting, and you need it to commute to work. Or like me, you had electrical problems and work from home. Or your fridge stopped working overnight and you need a new one.

In these cases, an emergency fund can help you repair or replace a necessity quickly, with less disruption to your life.

You or a dependent needs medical care

A month after paying for our home repairs, I was up all night with an awful toothache that over-the-counter painkillers barely dented. By the time I saw the dentist two days later, I was a miserable and sleep-deprived wreck. One root canal later, I was more than happy to pay out of my emergency savings for my $300 copay.

Don’t hesitate to use savings to get medical relief, treatment, or care for all aspects of your health.

Paying for urgent and necessary medical expenses is a solid use of an emergency fund, whether it’s the bill for an emergency room visit or ongoing therapy to manage your mental health. You also might use an emergency fund to pay premiums for health insurance to cover short-term gaps in coverage, which can happen if you become unemployed or switch jobs.

Treating a health issue early is not only a good use of an emergency fund, it can also be more cost-effective than pushing treatment off. Using savings to cover medical or dental costs now can keep a more minor or manageable health need from snowballing into a major (and more expensive) medical emergency.

You’re facing a family crisis

Emergencies don’t have to happen to you to still affect you. A crisis at home, in your family or in your circle of those who are like family can also necessitate the use of an emergency fund, too.

If a family member or partner becomes seriously ill, for example, you might need to take unpaid leave to care for them. Or you may need to travel and take time off if there’s a death in the family.

Other causes of family or personal crises might include infidelity, divorce, unplanned pregnancy, infertility, addiction, or a major move.

Life can go sideways in innumerable unexpected ways, and you can never plan for them all. But you can save an emergency fund that gives you the ability to show up for your loved ones when they need you.

You’re preventing an emergency

Discerning what is and isn’t an emergency can be hard. Some situations have a lot more gray to them. You might find yourself stuck in a situation that is making you miserable or facing a problem that’s big, but not necessarily urgent.

One helpful metric I use is asking: If I don’t address this now, is there a risk this will become an emergency in the future? If the answer is yes, it might be time to consider using your emergency fund to pay your way out of a tight or scary spot.

Maybe your job is miserable and only becoming more toxic, to the point you’re starting to feel like every week you spend there is bringing you closer to a breakdown. Or perhaps your live-in partner has started treating you badly, and you realize if you can’t move out it might escalate.

Or maybe you love your job at a company that went fully remote when the pandemic started. But now they’re transitioning back to the office, and you still have a loved one in your household who’s immunocompromised and you can’t risk exposing them.

In situations like these, only you can decide what is the best way forward, and on what timetable. But having an emergency fund, and being willing to leverage it, gives you more options. You can face tough decisions knowing you have the resources needed to prioritize yourself and your loved ones.

Summary

Your emergency fund is there so that you can deal with life’s curveballs. It’s ok to use it if not using it will cause harm to you or someone you love. Loss of income, health issues, unexpected emergency travel, or to preserve (or regain) your mental health are all great reasons to tap into your emergency fund.

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