WHEN IS IT OK TO USE YOUR EMERGENCY FUND?

Have you ever had to use money from your emergency fund? I know I have. Or perhaps there have been times where you sure wish you had an emergency fund to use when something unexpected has happened. I’ve been there too.  I can think of situations where our cars needed a big expensive fix. Or one hot Oklahoma summer, our HVAC completely died. Or right now, we are both pretty much out of work due to the coronavirus. And maybe you are too. You may be wondering, when is it OK to use my emergency fund? Here’s when it’s OK to use that emergency fund and then let’s chat about some examples of when it is NOT OK to use it. 

IT’S OK TO USE YOUR EMERGENCY FUND WHEN SOMETHING UNEXPECTED HAPPENS.

Simply stated, it is OK to use your emergency fund when something unexpected happens. But what I mean by that, is that the event was truly unexpected and unpredictable. Maybe you lost your job and you’re wondering if you can use your emergency fund to pay rent or to buy groceries– that would be a great time to use it. You probably did not predict that you were going to lose your job and you still have financial obligations, such as rent. Use your emergency fund while you find another job to replace your income. On the other hand, an emergency fund shouldn’t be used for something that you knew was going to happen at some point, but may have forgotten about. This includes things like annual car insurance payments. Sure, it may come due at an inconvenient time. But you can always count on having to pay that every year, making it expected, rather than unexpected. That’s something you should be saving up for throughout the year, rather than using an emergency fund. 

[Related: How to Earn Money Without a Job].

IT’S OK TO USE IT WHEN THE UNEXPECTED EVENT IS ACTUALLY AN EMERGENCY. 

In order for it to be OK to use your emergency fund, the unexpected event has to actually be an emergency. There might be some unexpected things that happen to you that aren’t emergencies. Maybe at the last minute your favorite band decides to come into town and tickets are really expensive. You probably shouldn’t use your emergency fund to go even though that event is unexpected. (I’m not saying you can’t go! Make sacrifices in other areas of your budget and pull money from those areas rather than your sacred emergency fund!) A time when it would be OK to  use your emergency fund is if your old fridge/freezer died with tons of food and food storage in it– you could use your emergency fund to fix or replace the fridge/freezer. 

IT’S OK TO USE YOUR EMERGENCY FUND IF YOU CAN’T AVOID USING IT. 

A good indicator that it’s OK to use your emergency fund is when you simply cannot avoid using it when something unexpected happens. Is there no money anywhere in your budget that you can pull from to cover the cost of the unexpected event? Is the event actually an emergency (not just a football game or some thing that you want to do?) Then you can feel confident that it’s an OK time to use your emergency fund. 

SITUATIONS WHEN IT IS OK TO USE IT:

Lets explore a few situations where it’s perfectly OK to use your EF. 

You and or your spouse lose a job. If you and or your spouse lose your job (a very common scenario right now with COVID-19), it is absolutely OK to use your emergency fund to cover your expenses while you figure something else out. 

When you have a medical emergency. Why is it OK to use your emergency fund? Because you need to be treated when an urgent medical emergency arises. You could not expect the medical emergency and you probably won’t have enough funds to cover your medical bill from other places in your budget. Keep in mind, however, that most hospitals will be willing to work with you by helping you come up with an interest free payment plan if you don’t have all the funds you need to pay the bill entirely. [Related: How to Lower Your Hospital Bill].

You’re involved in a car crash. Why use your emergency fund? Because you will need alternate transportation to get back to work and normal life if you lose your car in an accident. You may have occurred medical bills. These are unexpected, urgent expenses that need to be taken care of sooner than later and you probably don’t have any other funds to cover this event.

When your air conditioning or heat goes out during extreme weather. Why is it OK? Because I don’t want you having a heat stroke at home and this is a totally unexpected, urgent event. 

SITUATIONS WHEN YOU SHOULD NOT USE IT:

When your annual car insurance payment is due. Why not use your emergency fund? Because that’s a predictable expense. You knew that was coming at some point, even if you forgot when it was going to become due and you knew how much it was going to cost. Ideally you would save up for this expense throughout the year. 

When there is a really good deal at your favorite store. Why not use your emergency fund? Because this is not an emergency. You can make sacrifices in other areas of your budget, such as your grocery budget or fun budget, but don’t rob your emergency fund. 

WHAT TO DO AFTER I USE MY EMERGENCY FUND? 

After you’ve used your emergency fund, you should place your other financial goals on hold while you build up your savings again, since you never know when another emergency will happen again. Not that you need to feel like bad things are going to happen to you all the time, but you do want to be prepared just in case something unexpected happens. So focus on rebuilding that fund when you borrow from it. 

While you want to avoid using your emergency fund if you can, you don’t need to avoid using it at all costs. After all, that’s exactly what your emergency fund is for– to use in case of an emergency. Just make sure you aren’t justifying using your emergency fund at an inappropriate time. It should only be used when an actual unexpected emergency occurs and you really can’t avoid using it. This is true because you never know when you will need that emergency fund. If you use it at an inappropriate time, you run the risk of depleting your fund when an actual emergency occurs and not having money to cover the emergency. 

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