When Should You Spend Your Emergency Fund?

Setting up an emergency fund is often highlighted as an important aspect of personal finance, but we don’t talk much about when you should use the money.
Recent events affecting consumer finances, including the COVID-19 pandemic and high inflation over the past year, may have forced some to dip into their emergency savings. In June 2022, Bankrate found that only 24% of adults surveyed had more savings than a year earlier, while 34% said they were saving less.
Now that the pandemic has subsided, perhaps try to rebuild that fund and put more money into a savings account. However, that doesn’t mean emergencies won’t happen. Additionally, most experts say the U.S. economy will enter a recession this year, which will impact the financial lives of many consumers.

What should you do with your emergency fund?

Emergency funds are designed to help you cover unexpected expenses or cover expenses during a period of lost income.
Sudden emergency expenses are common — and they can be unpredictable. A 2021 study found that 38 percent of households nationwide are facing severe financial hardship. These difficulties may be due to loss of income, sudden expenses or wages not keeping up with inflation.

To be able to cover these expenses, it is crucial to build up an emergency fund. Here’s a breakdown of four situations in which it might be a good idea to tap into your emergency savings to help you overcome financial hardship and maintain a standard of living.


One of the biggest financial hardships is losing your job. Unemployment is likely to rise as a recession looms, depriving many people of their primary source of income.
If you lose your job, you may need to tap into your emergency fund to cover basic expenses like shelter and food.

Income reduction

Even if you are not out of a job, your hours or salary may be cut. Or some people choose to work fewer hours to focus on other areas of life, such as work. B. Taking care of children, pursuing higher education, or starting a new business.

If this is the case, you may need to dip into your emergency savings to make up the difference. Figure out how much you can cut from your budget, see if there’s a way to cover most of your necessities with your reduced income, and then reach out to your emergency fund for the rest.

Medical fees

Medical bills are a huge source of stress and financial distress. Even if you have health insurance, you may still have to pay a co-pay and may still have to pay a deductible. In this case, it makes sense to tap into your emergency fund to cover some of the bill.
However, you can reduce the amount you take out of your savings account at one time by consulting with your healthcare provider to see if you can work out a payment plan.

Emergency repair

If you rely on your car to get to work, you may need to tap into your emergency savings to pay for car repairs. Also, do rush repairs at home, like B. Refrigerator or stove is broken, pay for professional help or buy new appliances. It may be better to use emergency cash to cover these expenses than to use credit cards and run into debt.

How to Reduce Withdrawals from Your Emergency Fund

When you find yourself in financial trouble, whether due to job loss, medical bills, or other issues, it’s important to find a way to extend your emergency savings for as long as possible.
Creating an emergency budget can be a step toward making your money last longer. But you can also do some other things:

  • Apply for Unemployment Benefits: If you lose your job, apply for unemployment benefits right away. These benefits can take a while to kick in, which is why it’s so important to apply even if you’re looking for another job. Receiving benefits can help reduce reliance on an emergency fund.
  • Check out community resources: Your community is often a good place to turn to in times of need. For example, many towns have grocery banks so you don’t have to dip into your emergency fund to buy groceries. Additionally, emergency care and housing assistance may be available in your community. Check with local agencies and nonprofits to see if you qualify.
  • Talk to your creditors: Depending on the circumstances, you may be entitled to some level of forbearance. Remember, your interest will still accrue, and you’ll eventually need to catch up or create a repayment plan.
  • Get help from friends and family: In some cases, you can get help from friends and family in an emergency. Of course, this means that you have to be willing to return their help when they get stuck.
  • Shift to the gig economy: A gig or side hustle such as delivering meals or running a blog can add to your income stream. The extra income can be used to pay for some necessities, reducing the need to draw money from your emergency fund.

Finding other ways to avoid frequent dips in emergency funds can go a long way and reduce the need to rebuild.

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