Published in: Banks | July 30, 2020
By: Dana George
We have been trained to keep our hands out of savings, but there are times when it makes more sense to dip into that account.
How many times have you heard that you should leave your savings account alone, that you need enough cash tucked away to cover at least three to six months' worth of bills? It's a solid piece of advice. It is wise to prioritize savings and put money away for a rainy day.
But there are exceptions, times when taking money out of your savings is the best option. Here are three of those exceptions.
If you are one of the millions of Americans who've shuttered their businesses or lost a job due to COVID-19, you may find yourself in a pinch when it comes time to make the mortgage or rent payment. Each state has different protections and assistance programs in place for renters and homeowners, but current protections for federally backed mortgages are set to expire at the end of August. We are still waiting to hear if the second stimulus package currently being debated in the Senate will include housing assistance.
Before withdrawing funds from savings, though, make sure to do the following:
If you have spoken with your landlord or mortgage company, shared your situation with friends and family, and still cannot pay for housing, it is time to tap into your savings.
As the debate rages as to whether healthcare is a privilege or a right in the U.S., millions of individuals go without necessary medical treatment. According to a Gallup poll conducted in December 2019, before the spread of the novel coronavirus, 25% of Americans reported that they or a family member had delayed the treatment of a serious medical issue in the past year due to costs. Months earlier, in May 2019, a study by the American Cancer Society found that 56% of adults said they'd experienced medical financial hardship in some form.
If you avoid seeing a doctor when you need to, do not take all your prescribed medications because you don't want to spend the money, or postpone screenings and tests that could extend your life, it's time to break into your savings account. Nothing is more important than your health. And realistically, what good is a pile of money if you're not around to use it?
No matter how well you plan, life happens. Some things are out of your control, like the death of a loved one that requires you to pay for airline tickets and a hotel stay, a job loss only months after having a baby, unexpected dental surgery, or home repairs not covered by insurance. Unless you can charge an expense to a credit card with a 0% promotional rate and pay that card off before the promotional rate expires, it is smarter to take money out of savings and pay cash.
One of the toughest parts of being an adult is the occasional need to do something you do not want to do. If storing Benjamins is your jam and taking those hard-earned dollars out of savings nauseates you, that's a good thing; it means that you are financially responsible.
But life is about balance. As wise as it is to leave your savings account alone, the entire point of having one is to be able to cover emergencies.
You have already proved that you know how to save. Rather than allow yourself to feel bad about withdrawing funds from savings, create a plan to rebuild your account. That way it will be there the next time you need it.
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