When to Use Your Emergency Fund

Emergency Fund Series
Photo illustration to accompany article on what you should use an emergency fund for Getty Images
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After you’ve built up a solid safety net you’ll need to determine when it’s OK to use it.

In some cases, the decision may be simple. If you lose your job for an extended period of time, take on unexpected medical bills you’re struggling to pay off, or need an urgent home repair after a natural disaster, for instance, you can rest assured you have your emergency fund to fall back on.

But not every “emergency” in your life will be quite as clear. It could be an exciting opportunity that you’ll need to dip into savings to afford or a minor auto repair you could risk paying off with a loan or credit card.

According to Greg McBride, CFA, chief financial analyst for Bankrate.com, you can use your record of savings diligence as a litmus test. How likely are you to replace the money once it’s gone?

“If you’ve got in a habit of saving where you’re constantly feeding that account with every paycheck, it’s easier to justify taking that money out because you know you’re only one paycheck away from putting it back in,” McBride says. “But if you don’t have that regular contribution, then what comes out is not going to go back in. In that case, you’ve got to be much more stringent with yourself.”

What Should You Use Your Emergency Fund For?

You should use discretion before spending your emergency savings to ensure that reserve is available when you need it. Here are a few examples to consider:  

Financial hardship

As unemployment levels skyrocket and the economic crisis resulting from the coronavirus pandemic continues, financial hardship is no longer just a fear for many Americans, but also a growing reality.

The current pandemic is a unique crisis, so if you’ve lost your income recently, whether temporarily or indefinitely, your first step should be asking for assistance. Contact your loan servicers, credit card issuers, landlord, and other service providers to work out a forbearance or hardship plan to lessen the burden.

Then use your emergency fund to supplement any essential expenses you still need to pay. You can use whatever cash you may still have coming in to begin building the savings back up little by little. But focus on meeting your needs with what savings you have, then replenish the fund once you’re back on your feet with a steady income.

Emergency medical bills

Since it’s difficult to predict a broken bone or diagnosis requiring costly treatments, unexpected costs often come in the form of medical bills.

In fact, Springer research from 2019 reveals approximately 137 million Americans faced hardship (such as medical debt or distress about household finances) due to medical bills in the past year. According to a 2016 report by the Kaiser Family Foundation and New York Times, about 60% of those with difficulty paying medical bills also struggled with other payments due to the medical bills. 

Having a savings plan in place for when a medical emergency inevitably strikes is essential. Not only can you prevent added stress during an already fraught experience, but you can also safeguard your overall financial plan from the added cost.

Auto or home repairs

Auto and home repairs are typically not as costly or long-lasting as medical emergencies, but they can be just as unpredictable.

Without an emergency fund, a relatively small $1,000 repair could take months to pay off and result in hundreds of added dollars in interest if you’re forced to charge it to a credit card.

Instead, your emergency fund can be an excellent resource for necessary repairs — though you should refrain from dipping into it for simple cosmetic changes. Even if you’re still building your fund and don’t quite have enough to cover the full cost, supplementing what you have to pay with your savings can help ease the burden.


In addition to your emergency fund, it’s wise to have separate savings accounts for opportunities you can plan for, such as a vacation or a downpayment on a home.

But some opportunities are more difficult to plan for, such as a cross-country move or once-in-a-lifetime trip.

“Those who are disciplined savers may be able to use that emergency savings for more than just emergencies,” McBride says. “They may be able to use that for opportunities. If you want to invest in a business, that may be a time when you’re glad you’ve got savings.” 

While you should be selective and have a plan to replace your emergency fund, you may decide an unexpected opportunity is worth taking some cash.

“It allows you to take advantage of an opportunity that may otherwise pass you by,” McBride says.

Pro Tip

Your emergency fund is there to use if you need it. Don’t go into debt or borrow money for essential costs your emergency fund could cover.

Restock Your Emergency Fund

After depleting your emergency fund, make sure you have a replenishment plan; each time you take money out, know how you’re going to replace it.

Revisit your budget to find where you can start to supplement your emergency fund. If you diverted extra money each month towards another goal after fully stocking your savings, start putting it toward your savings once again until you’ve restored your fund or met a new savings goal.

Use the lessons you learned and strategies that worked best for you before, such as automated transfers or regular reviews, to make saving even simpler this time.

Saving for Emergencies During an Emergency

Saving can be difficult during the best of times, but when you’ve already lost your job, or you’re drowning in unexpected debt balances, it’s even more of an uphill battle.

First thing’s first: Know your priorities.

“If you’ve lost your income, you’re just trying to get the bills paid, so saving is a battle to fight another day,” McBride says. “If you don’t have income, you don’t have income to save.” 

There are ways you can begin a small cushion even when your emergency has already arrived, though, especially given resources and assistance available during the current crisis.

“If you haven’t started an emergency fund, it may feel impossible to build one now,” says Brian Madgett, head of consumer education for New York Life. “Start with what you can save now, and evaluate opportunities to pause some of the discretionary expenses you regularly incur. With most people staying indoors, consider redirecting commuting and other social funds to your emergency savings account.”

And even if there’s little you can do today, start developing your game plan for when your financial situation improves, so you can reduce the effects of future hardship.

Your emergency fund is the bedrock of your financial foundation,” says Liz Plot, CFP, associate financial planner at Ballast Point Financial Planning in Columbia, Maryland. “While this is a once-in-a-lifetime type of event, emergencies continue to happen.” 

“I’d encourage people to come up with a plan for when this is all over,” Plot says. “Right now, it’s very difficult for a lot of people, but once we’re on the other side of this and you start to work again, the emergency fund might drop to a lower priority, but just keep it in mind.” 

Stay Disciplined 

Nearly as important as having an emergency fund in the first place is being disciplined enough to reserve it for emergencies.

Be smart about when you use your emergency fund, but also remember it’s there for you to use in emergencies. Don’t take out new debt for things your emergency fund could cover.

“You want to be hands-off as much as possible,” McBride says. “Use that emergency savings for significant things like income disruption, reduced hours, or outright job loss — things that are disruptive not just financially, but from a lifestyle perspective.”

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