We live in a world full of uncertainties. Having something to pull out and use when emergency strikes is priceless. Whether it’s just a thousand dollars of your starter emergency fund or $10,000 of your full emergency fund, you will have peace of mind knowing you have something saved for a rainy day.

Whether it’s a job loss, a medical emergency, a natural disaster, or for some other reason, having an emergency fund will help you to sustain necessary expenses. 

The rules surrounding emergency funds are simple:

  • Everyone should have an emergency fund and it should be kept separate from regular savings.
  • The ideal amount of an emergency fund should cover three to six month’s worth of living expenses in a liquid account. It may take time to build up to that, but that should be your goal.

Emergencies may vary and look different for everyone. So the question now is, when should you use your emergency fund? What is considered an emergency? You could ask yourself a few questions before deciding to tap into your emergency fund:

  • Is it unexpected?
  • Is the expense absolutely necessary?
  • Is the expense limiting or standing in the way of your ability to earn an income, stay healthy, and basically live a normal daily life?
  • Is it urgent?

If the expense is something more of a want than a need, take a step backward and plan for that expense later on. Here are a few scenarios that could justify the need to use your emergency fund:

1.Unexpected Job Loss/Loss of Income

Aside from lost wages, job loss could also mean loss of health insurance, which may be an even bigger problem. 

Loss of income does not only cover loss of employment. What will happen if you suddenly need to move across town to take care of your mother who suddenly fell ill? What if you get laid off or downsized out of a job as a result of your company being bought by a bigger enterprise? 

If you or your partner lost a job or lost a source of income, you can use your emergency fund to cover daily living expenses, such as bills, mortgage or rental, insurance, and groceries. At least until the economy gets stable again and you get a new job.

2.Medical Emergencies

We don’t want ourselves or any of our family members to fall ill, however, accidents happen. That’s when it would be ideal to use your emergency fund. Medical coverage is an expensive but necessary living expense. 

Whether it is for an operation for a burst appendix or a simple case of measles, getting medical care could rack up huge medical bills. Even if you have health insurance, some things may not be covered and still fall back on you to pay out of pocket.

If you or a family member suddenly gets sick, using your emergency fund is appropriate.

3.Major Disaster

Just like medical emergencies, major disasters like flood or fire are horrible and unexpected. Your house suddenly catches fire or your roof was damaged from a fallen tree due to a storm. Whatever disaster it is, nothing could ever prepare you for the worst.

Almost everyone has insurance that could cover these situations, but there would still be deductibles that you will need to pay. Living expenses during the insurance adjustments or renovations must also be taken into consideration. And some insurance policies may not cover everything that could possibly go wrong. During times like these, using your emergency fund may be necessary.

Other acceptable reasons to use your emergency fund include:

  • Pet emergencies
  • Emergency arrangements when traveling overseas
  • Unexpected major dental expense
  • Car repairs
  • Funeral costs
  • Unanticipated travel expenses
  • Bigger-than-expected tax bill

There are so many expenses that are considered practical, but not necessarily essential. Think hard whether it is worth touching your emergency fund or not. It’s all up to you when you want to use the emergency fund—do what is ideal and best for your current financial and personal situation.

For your financial concerns, contact Calcite Credit Union for assistance.