Using Your Emergency Fund
Be cautious about tapping into emergency savings. If you’re saving for a rainy day and it’s constantly pouring, then it makes sense to use your emergency fund, right?
Not always. Before you decide to use your emergency savings, consider:
- Is it really an emergency? A flat tire is an emergency. Paying bills if you’ve lost your job is an emergency. A broken arm is an emergency. But regularly occurring expenses like birthdays, holiday gifts and new school clothes are not emergencies. If you know when something is due, you can plan for it throughout the year or possibly eliminate it for a time.
- Is it a want or a need? Wants are nice to have but are not essentials. This might include eating out, going to movies or getting the newest cellphone. Needs are the essentials, the basics of life that you must have to survive.
- Do you need it right now? Just because the jacket you have been watching at the store is on sale doesn’t mean it’s an emergency. These funds need to be saved for broken appliances, emergency room visits or your car repairs.
Remember that when you do decide to use your emergency fund, you can feel proud that you were able to avoid using your high-interest credit card or borrowing money from friends and relatives. Feel good about using your emergency fund for its intended purpose.