Thinking of Raiding Your Emergency Fund to Buy Christmas Gifts? Here's Why That's a Really Terrible Idea

The holidays are, for many people, a truly wonderful time of the year. But for others, they can be overwhelmingly stressful. And a big reason boils down to the personal finance hit of buying gifts.

Of course, buying gifts is something you could always say no to. But saying no is easier said than done. How do you easily tell your kids you're skimping on gifts when their friends are going to be opening box after box on Christmas morning -- and potentially posting about it on their social media pages?

If you didn't manage to sock away much money for gift-giving purposes this holiday season, then you may be thinking of raiding your emergency fund to purchase some at the last minute. In fact, 1 in 12 Americans with an emergency fund says they'll dip into it this year to complete their holiday shopping, according to a CouponFollow survey. But that's a mistake you might sorely regret.

Remember what that money is for

An emergency fund should not be treated the same as a general savings account. It's fine to tap your general savings account for things like vacations, furniture, and holiday expenses.

But your emergency fund should be reserved for -- wait for it -- emergencies. And if you take a withdrawal for a non-essential purpose, you'll risk not having enough money left over for when an urgent need arises, like a home or car repair you just don't have the option to put off.

Now you may be thinking, "But why should I rack up credit card debt when I have money that belongs to me sitting in savings?" And it's true -- you could take, say, $500 out of your savings to avoid a $500 credit card balance you're forced to carry forward.

But if you raid your emergency fund for holiday gifts, you might avoid debt now only to land in it later on. So at that point, you're not doing yourself any favors.

Of course, the answer here isn't to just resort to taking on holiday debt. Instead, it's to rethink your approach to gift-giving.

Go the more affordable route

You may not have the money to shower your loved ones with gifts during the holidays. But that doesn't mean your choice is to buy the people you love everything they want or buy them nothing at all. There may be a reasonable middle ground that you can swing financially without raiding your emergency savings.

Think about the things your kids enjoy. If you can't buy your teen a new gaming system, maybe you could give them money they can save toward one. Or maybe you can buy them a new game for their existing system.

Similarly, your mother and sister might love cashmere. If you can't swing two sweaters at $140 apiece, find a nice $40 sweater for each of them instead. Or, knit one if you have the skills and time (you'll probably need to get moving ASAP, but it may be doable).

It's hard to say no to the pressure to buy gifts for the people you love. But you don't want to leave yourself with an emergency fund that falls short during an actual emergency. So try to make changes to your approach to holiday spending so you can maintain that protection and avoid debt at the same time.