3 Questions to Ask Before Using Your Emergency Fund

So let’s say you’ve completed the first three Baby Steps. You are free from debt, and you’re well on your way to saving for a great retirement and a loan-free college experience for your kids. But inevitably, something comes up that will cost thousands of dollars to replace, repair or redo.

Some of these things—a broken air conditioner in the heat of the summer, a leaky roof or a major medical issue—are obvious grounds for breaking into the emergency fund without thinking twice. After all, that’s what it’s there for.

But there are some events that are just out of the obvious zone. How do you decide when it’s appropriate to tap into those emergency savings?

These three questions may help you make up your mind before using your saved-up stash.  

1. Is It Unexpected?

Life has a few surprises we could all live without, like a job layoff. This is a great opportunity for your emergency fund to go to work for you. It will help pay the bills until you or your spouse land that next dream job.

And if a tornado or flood visits your neighborhood, it’s perfectly fine to use your rainy-day stash. Let it cover your insurance deductibles or other property damage your policy doesn’t cover—that’s what it’s there for.

But annually reoccurring expenses? “I forgot to shop for Christmas presents until December 23” isn’t an emergency. It can certainly feel like one, but it’s not. Think ahead in the year and plan your budget around these events. That way your emergency fund will be there when you really need it.

Same goes for back-to-school shopping. It shouldn’t come as a shock that your kids need new binders, index cards and composition notebooks every August. By saving a little each month in a separate fund, you can actually enjoy these big occasions instead of dreading them.

2. Is It Absolutely Necessary?

Needs are often confused with wants, but the two have nothing in common. If your minivan breaks down, that’s your transportation—you need to get it fixed so you can get to work or pick the kids up from practice! Or if you discover a forest of mold growing behind your bedroom walls, you need to have enough cash on hand to temporarily move out and pay for the cleanup. Those situations are without a doubt emergencies!

But if you’re just tired of the bubblegum pink tile in your bathroom, or if you suddenly “need” a new convertible, think again. Your house and car may not be the talk of the town, but as long as they’re safe and reliable, cosmetic fixes are definitely wants—so they are great to save for in a fund. New stuff is great, but don’t steal from your needs to pay for your wants.

3. Is It Urgent?

When an immediate need comes up, the last thing you should worry about is how you’re going to pay for it. So if your child catches a baseball with his face and needs stitches or your just-replaced furnace suddenly dies in the dead of winter, don’t stress. Focus on the task at hand and leave the rest up to your emergency fund.

On the flip side, big sales aren’t urgent. Just because your favorite appliance shop is having the closeout sale of the century doesn’t mean you need a new washer, dryer, oven and fridge. If you want to replace old but still-functioning appliances, flash all that cash you saved up in your New Appliances fund and see what kind of deals you can score.

If You Have to Use the Money, It’s Okay!

Your emergency fund may feel like a ton of money just sitting there doing nothing, but it’s actually doing a lot. It’s your safety net against the unpredictable—the crazy part of life. So don’t be tempted to drain it just because you see something shiny and new.

On the other hand, set up your emergency fund and give yourself permission to use it if you have an immediate, unexpected expense. Just remember to replenish your savings as soon as you get back on your feet. You never know when you’ll need it next.