When should you use your emergency fund?

emergency fund

In life, you can always expect the unexpected. You may not know which curveballs will be thrown your way, but you can be financially prepared to deal with the issue by building an emergency fund. 

This isn’t your regular savings account, but money set aside to take care of any unplanned expenses or events that impact your financial security. 

Continue reading as we take a look at why you need to have emergency expenses ready for those unexpected bills.

Why should creating an emergency fund be a top priority? 

There are times when life just decides to hit you with an unexpected bill and not having emergency cash on hand can add more stress to the situation. Car repairs, medical expenses, or plumbing issues can all sneak up on you out of nowhere. 

Losing a job or taking a pay cut can cause disruptions to your financial planning, leaving you scrambling to pay bills. But, if you have an emergency fund then you have a safety net to catch you when life throws you off balance. Keeping emergency money readily available means you won’t have to wait for approval on a high-interest loan or pay interest fees on your credit card. 

When the unpredictable happens your cash flow won’t be derailed. Keep in mind, this isn’t a long-term savings plan, but a fund to cover unforeseen situations that should only be used in the case of an emergency.

When to use emergency fund

A guideline to stick to is to only use your emergency cash when the unexpected happens. Whatever you are spending the funds on should be a necessary and urgent expense. Set a specific dollar amount for the account and only draw from it when an emergency occurs. Be sure to replenish the amount withdrawn so you are prepared for the next unexpected bill. 

Unexpected expenses 

An unanticipated medical expense can happen even when you have insurance. Depending on the situation, if emergency surgery is needed you may have a larger co-pay than usual. Or you may need to reach the plan’s deductible in order to mitigate expenses. 

Car and home repairs can also surprise you. A pipe may burst causing an unplanned visit from the local plumber who determines the problem may be more extensive than you think. 

Or that funny sound your car has been making may finally stop, and not for a good reason. Maybe it’s the radiator, or worse, it’s the transmission. If you use your car to commute to work daily then you’ll need to get it up and working as soon as possible. 

There’s also the unexpected death that may require you to travel out of state. Having emergency cash ready will help in each of these situations. You have enough to worry about, so why not make it easier on yourself by starting an emergency fund?

Medical expenses

Medical expenses are often the cause of financial distress and can happen to any member of your household. If you have pets, keeping them healthy is certainly a priority. They may experience an illness that requires immediate medical attention and you want them to receive the best care. 

One of your children may have an accidental fall and break a bone, or you can be involved in a fender-bender and need to be taken to the emergency room. Dental surgery may be needed and if you aren’t prepared, you will have to find other means to pay your bill.

An emergency fund will ensure your household is protected so if you or someone you love experiences an unexpected medical emergency your bank account won’t be depleted. 

Job loss or pay cut

Losing your job is another financial emergency that you have to be prepared to tackle. You may be a freelancer who recently lost a client and your income has been reduced. Keeping enough cash to carry you through for 3-6 months can keep your stress levels down.

That emergency money will cover living costs and give you time to find another job, or lower your expenses. You won’t have to worry about food or housing as you’ll be able to sustain your lifestyle as you seek out ways to supplement your income.

Explore other options

A good mindset to have regarding your emergency fund is to explore other options before withdrawing from the emergency account, even when it’s a true emergency. 

How? Well, there are a few resources you can look into before you decide your stash is the best option. The goal is to minimize the amount of emergency money you spend in order to stretch your savings. 

If you’ve lost your job, apply for unemployment benefits to help ease your financial woes. Turn to community food banks to help with your grocery bill. And check with your utility company for emergency assistance. Many utility companies have programs to assist customers through hard times. 

Don’t forget to check with family and friends who may be able to help. You may even want to pick up a side gig like driving for Uber or making deliveries for Postmates. Think of ways you can reduce the need to tap into your emergency cash fund, and you won’t have to do much rebuilding once your situation becomes more stable.

When not to use an emergency fund

Now that we know what situations emergency cash should be used for, let’s look at the reasons you should not tap into these resources.

Periodic and expected expenses

There are bills that you know are coming every month, quarter, or year. Either way, these should be included in your regular budget, and if they’re not, now is the time to start. 

Insurance payments, subscription renewals, taxes, car registrations, and similarly scheduled bills should all be planned in advance. These are not expenses that catch you off guard, you know they are coming and your emergency fund is not made to cover expected expenses.

Nonessential spending

Christmas comes around every year and if you want to buy gifts, your emergency cash should not fund your shopping spree. You may be due for a new mobile phone, and if so, your upgrade should be paid for with the money you’ve budgeted for personal expenses. 

For many, creating an emergency fund may require a closer look at what you prioritize and you may need to make some changes. If so, it’s better to do it now and save yourself a lot of grief later. 


Although your desire to take a vacation may feel like an urgent need, this is not an emergency. A vacation fund is much different than an emergency fund, and if you love to travel, you should begin setting aside money for that specific purpose. 

This will keep you from using credit cards unnecessarily. There’s nothing like coming back from vacation and not having to worry about paying for it over the next few months. Keep emergency cash and vacation-related savings separate. That way, you can lounge on a beach while still having a secure safety net. 

After all, you can experience an emergency situation while on vacation and if you’ve used your emergency fund to pay for plane tickets and hotels, what will you dip into? 

Always rebuild your fund

If you have a true emergency and need to dip into the emergency cash stash, make sure you replenish what was withdrawn. Keep your spending to a minimum until you reach the preset amount for your fund. If you had to use it that’s okay because that’s why you have it. 

You may have used more than expected and you might want to increase the amount you save in the emergency fund for the next time you need it. These funds should be your priority, so if you’re saving for an upcoming vacation or a new car, you will have to put that on hold until you rebuild the emergency fund. 

Finding a side gig can hasten the pace at which you save, and it can even help contribute to the other funds. Whatever you do, always replace your emergency money once you’ve used it by adding more to your savings fund.

Stay dry on rainy days

Saving for a rainy day is necessary because it’s going to eventually rain. When it does you want to have an umbrella big enough to keep you from getting soaked. An emergency fund is one of those things that’s better to have and not need than need it and not have it.


What is an emergency fund?

It’s a savings account separate from your regular savings that exists to only get you through an emergency situation.

How much should I have in my emergency fund?

It really depends on your lifestyle, but a general rule of thumb is to keep enough to cover 3-6 months of expenses.

Where should I keep my emergency fund?

High-yield savings accounts, money market accounts, certificates of deposit (CDs), and IRA accounts are great places to stash your emergency cash.

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