3 Questions to Ask Yourself Before Taking Money Out of Your Emergency Fund

Taking money out of your emergency fund is a big deal. You need that money in your savings account to protect you against financial disaster when things inevitably go wrong. Without it, you could be forced to borrow or find yourself facing another serious personal finance crisis.

There are, of course, certain situations where withdrawing cash from emergency savings does make sense. After all, the money is there for a reason -- to help you out in your time of need. The problem is, it can sometimes be hard to determine if a particular expense is an emergency that justifies a withdrawal.

To decide if you should act, consider asking yourself these three questions that will guide you in making the right choice.

1. Will the withdrawn funds pay for a true necessity?

The first and most important question to ask yourself is whether you are going to use the money for a true necessity. This is something urgent that cannot wait until you're able to save up for it, and it is something you absolutely need -- not just something you want.

You never want to take money out of an emergency fund for an optional expense because then it won't be there when and if you really need it. With as many as 60% of Americans responding to a Pew Study reporting they had experienced an unexpected financial shock during the past year, you can't afford to take the risk of leaving yourself without emergency money because you spent yours on something you didn't really need.

2. What are your alternatives to tapping into your emergency fund?

The next thing to consider is what other options you have. If you could pick up some overtime or work a few hours at a side gig to get the money for your emergency expense, it's probably worth doing that so you don't tap funds you might need at a later time when you can't just put in some extra hours.

But if you would have to borrow money to cover the unexpected expense, then using your emergency money to cover the costs is usually going to be the right choice. After all, one of the big reasons to have an emergency fund is to avoid having to go into debt to cover surprise expenses.

3. What are the consequences if you don't withdraw the money?

Finally, you should consider the consequences of not taking the money out of the bank. If the outcome would be terrible for your health or financial security over the long term, then tapping your emergency fund is a good idea.

For example, you're obviously better off pulling money from your emergency fund to make a car or house payment you couldn't otherwise afford so you don't face foreclosure or repossession. Likewise, you're better off pulling money out for an unexpected medical bill than letting a health issue potentially get worse due to waiting.

If, on the other hand, the consequences aren't too serious (like, for example, you'd miss out on a fun vacation), then you'll want to avoid the withdrawal.

By asking yourself these three questions, you can make a smart choice about whether taking money out of your emergency fund is the right choice for the situation or something you might regret later.