When to Tap Your Emergency Fund

It can be oh-so tempting to tap into your emergency savings for something on your wish list – perhaps some patio furniture, a new TV, or a bike. But it’s important to remember that emergency funds are for emergencies, not the things you should otherwise budget or save for. Think of your emergency fund as your ace in the hole: a secret weapon to get you through trying times.

An emergency fund is money set aside in an easily accessible savings account to help you comfortably manage urgent essential expenses during unlikely circumstances. Since you never know what life can throw at you, experts commonly recommend setting aside at least three to six months’ worth of necessary costs, or at least a small amount each month that you can afford based on your situation.^1,2,3

So, if not anything from your wish list, what does warrant a withdrawal from your emergency savings? Ultimately it depends on your personal situation and financial needs, but here’s a list of what generally makes the cut, plus some tips on what you can do if you don’t have an emergency fund.

Though the idea can be unsettling, layoffs and furloughs aren’t uncommon – even when the economy is in tip-top shape. It pays to be prepared with an emergency fund that can cover three to six months^1,2 of essential expenses while in-between jobs (read “How Much Should I Have in an Emergency Fund?”).

However: If you’re unemployed through no fault of your own, you may be eligible for unemployment insurance benefits. Take a close look at your finances and ask yourself if you can get by on unemployment benefits alone. Can you cut back on other expenses and make it work? If not, it’s okay to cover the difference with your emergency savings. That’s what it’s there for. After all, you still have to eat and pay the bills.

I imagine every driver has experienced car troubles at some point or another. Whether it’s a leaky radiator or engine issues, your parked car got sideswiped by a semi, or your newly licensed teen backed into a fire hydrant while parking, car problems are usually unexpected and expensive to fix. 

For accidents – no matter who’s at fault – an emergency fund that can cover your car insurance deductible can help you handle repairs comfortably. If a new car is giving you trouble, be sure to check if it’s still under warranty as the repair might be covered. Otherwise, your emergency fund can help cover the costs of any unexpected car repairs.^1,2

Just try to avoid tapping into your emergency fund for routine maintenance like oil changes, new brake pads, new tires, or even a renewed registration or license. These are expected expenses that ideally should be budgeted for.

Houses need periodic maintenance and home appliances usually have to be replaced in time. It’s a fact of life. But technology lifespans – and mother nature – can be hard to predict. If you need to make a surprise home repair like fixing a faulty hot water heater or problematic AC system in the heat of summer, you can consider using your emergency fund. 

Homeowners insurance may cover the effects of natural disasters or other catastrophic events, but experts suggest it’s okay to tap into your emergency fund whenever needed.¹ If you’re a renter, contact your landlord. Certain repairs may be covered under your lease.

No matter how healthy you and your family are, some medical situations sometimes can’t be avoided. Whether it’s from a playtime accident, appendicitis, or a surprise root canal, an emergency fund can help you comfortably cover unexpected, urgent medical bills – especially if you have a high health insurance deductible.^1,2

A close friend of mine once took a job in London. She had just gotten settled in when a bit of a crisis hit close to home, requiring her to leave the new job, pack up all of her things, and hop on a flight back to her family home in New York. She used her emergency fund to make it happen, and cover her essential expenses while in between jobs.

Since personal finance is, after all, personal, you get to decide what constitutes an urgent, emergency expense. For example, I usually wouldn’t consider a new cell phone something worth tapping into my emergency fund for, but sometimes life happens. My cell phone was recently stolen with no chance of getting it back. Since I need one for work, and I don’t have a home phone, I tapped into my emergency fund to immediately get a replacement. I’ve since set aside money from every paycheck to rebuild the savings. 

The most important thing is to know your wants – aka discretionary expenses – from your needs, which are essential expenses like food and shelter. And if you do tap into your emergency fund, start rebuilding it as soon as you are able.