I’ve had an emergency fund since I started paying back my debt four years ago. At first, it was tiny, just $2,500. It wasn’t much, but it was enough to get me through unexpected expenses like car repairs and emergency vet bills. It didn’t give me much coverage for larger emergencies, but it did its job until I became debt free.
After that, I set out to boost my emergency fund up to $10,000, which was several months of living expenses at the time. That only took a few short months and that money has basically sat, untouched for several years. I didn’t need to use my emergency fund, until this January.
When to Use Your Emergency Fund
When I was building up my emergency fund, I had a vague idea of what constituted an emergency. It was always something extreme. An emergency was a car accident, getting fired, a pet needing surgery. Those were clearly emergencies, and clearly warranted the use of my emergency fund.
In reality, there have been a bunch of smaller, less urgent but still unplanned expenses that have come up over the years that might’ve warranted the use of my emergency fund. For example, in January, my husband broke his phone. It wasn’t old, the tab wasn’t paid off yet, so replacing it was expensive, almost $300.
Was this an emergency? Well, he needs a phone. We don’t have a landline so his cell phone was his only way to communicate with me. We didn’t have any other money we could easily pull from to cover this expense, and while we probably could’ve gotten by while saving the money for a new phone, I thought to myself: “why put ourselves through that when there is $10,000 sitting in a bank account, waiting to be used?”So we bit the bullet and used our emergency fund.
So we bit the bullet and used our emergency fund.
Why Use Your Emergency Fund
You should use your emergency fund when you have no other option, as was the case with the new cell phone.
But if you have other sources of cash, use those first. In the past two years, I’ve also been faced with expenses that could’ve constituted emergencies, but I had other cash stashed in other accounts that I used instead.
For example, just last week my husband took our car in to get our winter tires off and our summer tires installed. I strongly suspected when I made the appointment that the mechanic would tell us that we needed new tires, and I was right. $683 later, we had a brand new set of tires and an oil change. This was way, way more than I had budgeted for, but I didn’t use our emergency fund. Instead, I emptied out my car maintenance fund and I also emptied my new car fund. Together these two accounts had almost exactly $683 in them. Crisis averted!
I’m bummed to see my new car fund depleted since I’ve been slowly adding to that account by $100/month for the last three months, but that money is there to fund our transportation needs, and this was a transportation need.
An Emergency Is a Matter of Opinion
Unfortunately, our mechanic pointed out another serious repair, which will cost us another $800. It’s not an urgent repair, the wheels aren’t going to fall off the thing tomorrow, but in the next few weeks (after I get a few second opinions), this is going to have to be addressed.
Guess where that $800 is going to have to come from? That’s right, the emergency fund. While this isn’t an urgent car repair, it’s urgent enough that I won’t have time to save up for it, unless I decided to stop saving for my home down payment. I could do that, I but would really rather not divert my savings goals unless absolutely necessary. This is an emergency, and I’ll be using the emergency fund.
So my emergency fund, which stood at $10,000 for many, many months will soon be down to just $8,500 or so. While I’m not happy about this, I do recognize that I’ve been so, so lucky with a lack of emergencies in my life so far, and I’m happy to have money in the bank to rely on when stuff does hit the fan.
When do you use your emergency fund? Do you use it for car repairs, like me? Or is it ONLY for dire situations? I want to know!
Photo Credit: D&W Autos