When to Tap Your Emergency Fund

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.

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.

If you don’t have an emergency fund, you still have options. To help ease the burden of unexpected expenses, try to cut back on discretionary spending and establish a budget. Can you swing it? If so, great! If not, that’s okay too. If the expense isn’t too extreme, consider opening a 0% intro APR credit card. That way you can pay back a large, unexpected expense over time, interest free, as long as it’s paid off during the intro. Just be sure to pay close attention to the card’s terms and conditions so you’re not surprised when the introductory period ends. 

Besides credit cards, there are plenty of ways to borrow money, whether it’s from a family member, from your retirement account, or your home equity. But each method has its trade-offs. 

Still, personal finance professionals do insist that it’s wise to build an emergency fund.^1,2 Remember that it’s okay to start small: $500 or $1,000 can be enough to cover a minor unexpected expense. Even setting aside $50 every other week can go a long way over time.