4 Questions to Ask Before Tapping Your Emergency Fund

Don't make a decision you'll regret.

An emergency fund protects you against financial calamity in case things go wrong. You need to guard your emergency fund carefully and make sure the money you've worked hard to save is actually there to protect you from disaster when life throws you a curveball.

To make sure you're using this money as wisely as possible, there are four big questions you should ask yourself before you consider tapping your emergency fund to cover an expense.

1. Is this really a dire emergency?

An emergency fund should be for genuine emergencies, such as when you lose your job and need money to pay the mortgage or if you need medical care and can't pay for it. It's not for purchases you want to make but can't afford right away, nor is it for events you can save for in advance, such as a holiday or a wedding you want to attend.

Before you tap your emergency fund, ask yourself if the expense is absolutely necessary to stave off a personal or financial disaster. If not, then it's not an emergency that justifies raiding your savings account.

2. What other options do you have?

Once you've used money from your emergency fund, it's no longer there for future needs. As a result, before you take out money that you might need for another emergency later, consider whether you have other options for covering your current needs.

For example, see if you could pick up an extra shift at work or sell some unnecessary items to generate the money to cover the unexpected cost. That way, you can leave your emergency money alone for a time when you don't have any other options.

3. What are the consequences if you don't use your emergency fund?

Evaluating the possible consequences of not tapping your emergency fund is a good way to decide if taking money out of savings is worth it.

If not using your emergency money would lead you into debt that it's difficult to pay back, would damage your credit, would harm your health, or would cause other serious negative effects, you should probably take out the money. After all, that's what it's there for -- avoiding undesirable outcomes.

But if you'd just feel a little disappointed or would have to put off your desired spending for a few weeks and no adverse consequences would come, then you should leave the money alone.

4. How quickly can you pay back the money?

The biggest downside of raiding your emergency fund is that you're left unprotected until you replace that money. As a result, the longer it will take you to repay the money and rebuild your rainy day fund, the more you need to carefully consider whether tapping your emergency money is worth it.

If you need to take a small amount out and plan to put it back next payday, chances are good you'll be able to restore the emergency fund before you miss it. But if you're going to drain your account dry and it will take years to be prepared for emergencies again, you're taking a much bigger risk.

By considering these key issues, you could make the best choice about what to do with your emergency savings. If you find you really need the money, don't hesitate to take it out since you've saved it for just such a situation.