When should you use your emergency fund?

Many people spend a lot of time setting money aside to build a healthy emergency fund.

Couple watching a construction worker fix the ceiling in their kitchen

In some cases, this might cause them to hesitate to use the cash even if the situation seems to justify doing so. In others, they might be tempted to use some of the money to treat themselves on occasion. Even if they aren't facing an actual financial emergency.

By understanding when it is and isn't wise to use that cash, you can make smarter choices about your finances. If you're wondering when you should use your emergency fund. here are some times when tapping into that cash reserve is warranted.

Living expenses after a job loss

One of the main reasons to have an emergency fund is to pay for living expenses if you unexpectedly lose your job. In this case, the cash is a functional safety net, allowing you to continue paying required costs while you plan your next career move.

Similarly, using an emergency fund to pay for living expenses after a reduction in hours or another situation that results in a pay cut is fine. It allows you to stay afloat while you either wait for your hours to go back up or find something new that provides you with a better income.

Just make sure you focus on genuine necessities if you're using your emergency fund for this reason. For example, shop grocery sales or use coupons to limit food-related spending. Avoid unnecessary car trips to save fuel. Forgo dining out and cut back on other kinds of optional entertainment. That way, your money will last as long as possible, giving you more time to determine what comes next.

Additionally, access any other resources you may have available. For instance, you may qualify for unemployment if you've been let go, laid off, or had your hours reduced. Make sure you apply for unemployment even if you aren't sure your situation qualifies. If it turns out it does, you'll get a bit of an income boost, allowing you to use less of your emergency fund.

Vehicle repairs after a breakdown

While you should plan for routine vehicle maintenance in your budget, unexpected issues may warrant using your emergency fund. Even if you are diligent about maintaining your car, that doesn't mean you're guaranteed to avoid breakdowns, flat tires, or similar problems.

If something unexpected happens that puts your vehicle out of commission and having a car is essential to your day-to-day, using your emergency fund to get it back up and running is reasonable. Just make sure you get a competitive price on the work by shopping around and getting several quotes from reputable repair shops, ensuring you don't have to spend more than is necessary.

Home or auto insurance deductibles

Using your emergency fund to pay a home or auto insurance deductible is also appropriate. Usually, you'll only owe a deductible after an unexpected covered event like a vehicle accident or fire at your house.

Since paying your deductible allows you to get the required repairs, using your emergency fund to handle it isn't a bad idea. Just make sure you get quotes for the work and that your insurer pays its share, ensuring you don't have to come further out of pocket than necessary.

Emergency, must-have medical treatments

Even if you have insurance, the cost of emergency medical treatments can be incredibly high. Since accidents or sudden illnesses aren't something you can usually predict, using your emergency fund to handle any of the resulting costs isn't out of line.

However, you may not want to default to this option if it isn't necessary. For example, if the bill is large, many hospitals offer no-interest payment plans. In that case, you may be better off using that arrangement, allowing your emergency fund to earn interest while you pay down the debt over time.

Travel costs associated with family emergencies

During certain kinds of family emergencies – like a sudden, serious illness or death – you might need to head to another city or state without notice. If that's the case, don't hesitate to use your emergency fund to cover the cost if you can't manage it otherwise. That way, you can get where you need to go fast.

Just remember that recreational travel doesn't fall in this category, even if you're planning to see family along the way. For fun travel, you're better off saving up the money you'll need separately, ensuring your emergency fund is intact in case you end up needing it.

Emergency home repairs

While regular, expected home maintenance costs shouldn't come out of your emergency fund, you might need to tap that cash if an unexpected issue arises. For example, a pipe bursting, refrigerator breaking down, or a similar problem needs to be addressed quickly, so using your emergency fund can make sense.

As with other repair or replacement-oriented emergencies, you may want to shop around to ensure you're getting a great price. That way, you can use as little of your emergency fund as possible. Just make sure that you don't sacrifice when it comes to quality. As it's better to get a solid repair or replacement than go with a cheap solution that'll just result in an issue in the near future.

Critical technology replacement

While some technology you own may be primarily for entertainment purposes, other kinds of tech are essential. For instance, you might need a capable smartphone or laptop for work, or your children may need a computer to do their homework.

If a genuinely essential piece of technology breaks down or it has catastrophic damage, consider using your emergency fund to replace it. However, only do so if it's legitimately a must-have for a purpose other than entertainment. If it's solely for amusement, then you're better off setting money aside out of your budget and using that to cover the cost once you've got the money gathered up.

Emergency care for pets

Like people, pets can experience unexpected health issues, including acute illnesses, injuries, and more. While you shouldn't use your emergency fund for routine pet appointments.  Using the money to handle an unexpected, urgent pet health matter is fine. It ensures you can get your pet the help they need right away. Thus, increasing the odds that they'll survive the incident and live a healthy, comfortable life afterward.


This article was written by Tamila McDonald from The Free Financial Advisor and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.


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This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. Please consult an independent legal or financial advisor for specific advice about your individual situation.