Published in: Banks | May 14, 2020

3 Questions to Ask Yourself Before Tapping Emergency Savings

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The money is there to help you stay out of debt, but you don't want to raid your fund if you don't have to. 

If you want to be financially stable, one of the first and most important things you should do is to save up an emergency fund. An emergency fund is money set aside in an accessible account, such as a high-yield savings account, that you can use when things don't go your way. Most financial experts recommend you have three to six months of living expenses in yours, so that's a pretty hefty sum. 

It can be hard to build up an emergency fund that's large enough to protect you from life's calamities. And when you've struggled to save enough, it's also a challenge to decide what kinds of situations justify tapping into your fund. To help you decide, always answer these three important questions before taking any money out. 

A hand holding a hammer over a worried-looking piggy bank.

Image source: Getty Images

1. Is your spending essential?

Emergency funds are for emergencies -- things you cannot do without. That money is there to cover fundamental pressing needs, such as paying your mortgage after a job loss or covering the cost of an ER visit for a sprained ankle. 

But money should never be taken out for any purchase that isn't absolutely necessary. A sale on an item you've been wanting or tickets to an event that that will sell out quickly are not emergencies. The purchase needs to be one that's necessary to maintain your health, home, vehicle, or financial stability. 

2. Can it wait until you've saved up for it?

Some purchases are essential but not immediate. If you find out your child needs braces, for example, you'll want to fix their teeth, but it doesn't matter a whole lot if you do so tomorrow or two months from now.

If you have an essential purchase you need to make but it doesn't have to be made now, don't tap your emergency fund for it. Instead, start aggressively saving money to cover it by cutting other areas of your budget. That way your emergency fund will be preserved for surprise costs that do need to be covered immediately. 

3. Is there another way you can cover the cost without borrowing?

If you can pick up a few extra hours at work or cover your spending with an upcoming tax refund, it makes sense to rely on these other sources of funds. That way you can leave your emergency savings alone. 

It's also a good idea to develop savings so you can cover more costs without tapping your emergency fund. A car repair could be an emergency, for example, if you don't have money to cover it. But it's all but inevitable that your car will someday break and need repairs -- so rather than relying on your emergency fund to pay for them, you should have a dedicated car and home repair fund. Likewise, you or your kids will get sick at some point, so you should have some money saved to cover copays.

You may not have these funds available for the emergency you're facing right now, but once you've handled the immediate issue, aim to set up these bank accounts. If you contribute a small amount to them each month, you won't have to rely on your emergency savings next time. 

Don't be afraid to tap your emergency fund under the right circumstances

When you've asked yourself these questions and determined that these are expenses you must incur right away that you can't fund in any other way, it is OK to tap into your emergency fund. In fact, that's exactly what the money is there for. 

Once you've gotten past the emergency, though, make sure you rebuild your fund. After all, it was there for you this time, and you want it to be there for you again in the future.

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