How Can You Use an Emergency Fund?

Imagine your car breaks down driving to work. And the cost to repair it is big. Really big. Having an emergency fund stashed away to help pay for all or a portion of the bill truly can be a lifesaver when situations like this catch you by surprise. You can use the funds to pay for the repairs that day with no financial disruption to your life.

While it’s easy to determine that an event like this is a true emergency, other expenses may leave you wondering whether you should use your emergency fund to pay for them or not. If you’ve been putting money aside for emergencies, it’s important to know when to use it and what to use it for. Consider these emergency fund examples:

Here are 7 reasons why you may need to use your emergency fund:

1. Medical emergency – Even if you have health insurance, you may need to foot the bill for at least a portion of major medical procedures, especially if you have a high deductible. A trip to the emergency room, a sudden illness or surgery, and extensive dental work are all medical reasons you may need to use the money set aside in your emergency fund.

2. Family emergency – Planning ahead for your own bills and expenses is one thing, but knowing when a family member will need your help is another. Whether you have aging parents who need more care as they get older or another family member who needs immediate financial help, if someone you love is in a serious financial emergency, you can consider using your emergency fund to help them get out of their situation.

3. Car repairs – Sometimes a trip to the mechanic is just routine, other times it can result in a bill you were not prepared to pay. A major accident, engine repair or transmission damage, for example, are all big-ticket repairs that could cause you to tap into your emergency fund. That’s what it’s there for.

4. Home repairs – Maybe it’s finally time to replace the roof. Maybe a storm flooded your basement. Maybe your aging house needs updated electrical work. Home ownership can bring with it lots of unexpected costs. Your emergency fund can be useful when a major home expense pops up and you can’t find room in your monthly budget to pay for it.

5. Job loss or a reduction in income – Losing your job, getting laid off or having your income substantially reduced is one of the most financially stressful situations anyone can face, especially if you have no other source of income. This life-disrupting situation is exactly what your emergency fund is built for — it’s a way to handle your essential living expenses like rent, mortgage and utilities as you search for a way to replace that income.

6. Unexpected travel – Last-minute flights can be expensive. But when an out-of-town relative or friend is sick, or if you have to attend a memorial service, you have no choice but to pay the high cost of traveling at a moment’s notice. Use your emergency fund to pay for airline or train tickets. And if you need to use your fund for lodging too, look for the most budget-friendly accommodations, keeping in mind that you’re using emergency funds to pay for it.

7. Emergency vet visits – Unless you have pet insurance, the cost of an urgent trip to the veterinarian is typically substantial, especially if surgery or another extensive procedure is required. If the vet bill for helping your four-legged friend get well costs more than you can handle, your emergency fund could help cover those expenses — so you can focus less on the cost and more on the well-being of your furry companion.

Know what not to use your emergency fund for

Not every unexpected expense is a true emergency worthy of tapping into the emergency fund you’re working hard to build. For example, while holiday gift-giving may not be among your monthly budgeted expenses, it is not an emergency. The same is true for vacations, upgraded technology and devices, and other nonessential spending.

To make the most of your emergency fund, do your best to use it only when absolutely necessary. That means when an unexpected expense arises, evaluate whether this expense is essential to your life, not your lifestyle.

Replace any money you use from your emergency fund as soon as possible

Whether you end up using some or all of your emergency fund, you should make it a priority to replace those funds as soon as you can. If you haven’t already, consider setting up automatic deductions from your paycheck or checking account to go directly to the account that holds your emergency fund. Even if you only deduct $25 from your paycheck each week, you’ll save $1,000 in less than a year.

For more ways to rebuild your fund, check out our blogs on how to create an emergency fund and hobbies that can make you money.