Life in Transition

Navigating Personal Finances During Life Transitions

When Is It Appropriate to Use Your Emergency Fund?

One of the first pieces of advice any personal finance pro would give is to build an emergency fund that covers enough basic expenses for six months to one year.  So, the purpose of the emergency fund is to provide short-term cash in the event of a job loss.  However, other emergencies do crop up.  Cars break down, our health fails, the house floods.  So, the question is, when can you use your emergency fund?  Should you create other saving accounts specifically for car repairs, home repairs, etc instead?  For now, I think just having an emergency fund is enough for me.  Once I saved a suffiecient about, then I’ll start savings account for non-wage related emergencies.

I use a few guidelines for when I can use money from my emergency fund, other wage loss.

  • The event should be unexpected
  • The event requires immediate attention
  • I cannot cover the cost of with my regular budget

The emergency fund is not for expensive things that I want but don’t have funds to pay for right away.  In other words, I don’t let myself “borrow” money from my emergency fund.

So far, I have only used my emergency fund once, about a year ago, right after I graduated from college.  While in school, my parents help me cover part of rent, and I had a small meal plan that covered a few meals a week. I had a part-time job with a small biotech start up that covered all my other expenses.  My bills doubled upon graduation since my parents stopped covering part of rent and my roommates moved out.  My first paycheck as a post-college adult was $400 from working part-time the previous month, which was not even enough to cover rent at the time.  I began working full time right away, but wouldn’t get my paycheck a month later.  So, I used about $700 from my emergency fund to cover the rest of my bills and food my first month out of school.  I spent the rest of the year slowly replenishing my emergency fund back to $5000.

What guidelines do you use to determine whether you can take out money from your emergency fund? Have you ever taken out money from your emergency fund? What did you use the money for?


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9 thoughts on “When Is It Appropriate to Use Your Emergency Fund?

  1. Our EF is for multiple things such as with housing repairs and job loss.

  2. I’ve used my baby emergency fund a few times. I’ve used it for unexpected car repairs, and for an unexpected bill from the Canada Revenue Agency. Right now it’s about 10% below full, and I’m working on replenishing it slowly back up to $2500 – while maintaining my debt repayment schedule and wedding savings schedule.

  3. I hate using my EF – I want to use it eventually (or most of it – not all) on a down payment, so it really gets under my skin to use it.. I can replenish it pretty quickly though.

  4. I don’t have an EF. But if an emergency comes up, I will use a credit card, and then sell some of my bond funds to pay off the credit card. Keeping money in cash these days with 0 interest sucks, so I refuse to do it.

  5. I recently used my emergency fund to fix up a rental property. The problem is, that it was all of my emergency fund. Trying to rebuild it now. That means that I am ‘living dangerously’ at the moment.

    • Wow that’s rough. I would be really nervous wiping out my whole EF. Good luck rebuilding it and I hope no unexpected emergencies pop up until then.

  6. I think the only event that I would use my emergency fund is my husband or myself got laid off of work. Right now that’s pretty much what I feel its useful for.

  7. I first used my emergency fund to cover business travel since I didn’t get reimbursed until after the trip. I recently used it to cover my extra expenses when I had to move in February at the last minute. Hopefully I don’t need to use it again for quite awhile!

    I usually try to cover things with cash flow first, by just making my budget bigger for the month, but with how crazy things were in February, it was far easier to just spend out of my savings account and then replenish it with my paycheck at the end of the month.

    Right now, my general emergency fund is $21,600, which is quite a nice size and I doubt that something could happen that that wouldn’t cover.

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