When is it ok to dip into your emergency fund?

Once I created an emergency fund, seeing my account balance climb each month was reassuring. It gave me a sense of security that I was prepared for life’s eventual surprises.  

Then I pulled money out.

Bam. Months of diligent savings, gone. Was it okay to do that?

In my case, I needed the money to fix my truck. If you’re wondering when it’s ok to dip into your emergency fund, here are some guidelines.

1. Your expense is unexpected

Your emergency fund isn’t for anticipated expenses like your child’s college tuition or a planned home renovation. When you know those expenses are coming, you can save up and plan how to pay for them. 

Unexpected expenses, however? Different story. If your roof starts to leak or your health insurance won’t cover a big medical bill, it’s appropriate to look at your emergency fund to cover the expense. 

My vehicle repair situation caught me off guard. It shouldn’t have. No car lasts forever without maintenance. Next time, I won’t be as surprised.

2. Your expense is essential

Identify your wants versus your needs. Your needs are things like housing, transportation, groceries, insurance, health care, minimum debt payments, utilities, and child care. Everything else is a want. 

Don’t be tempted by a sale on something you want. Your emergency fund should be reserved for essentials. Use a different savings account to save up for wants.

I live in a town with no public transportation. Because of that, having a working vehicle is essential. 

3. Your expense is urgent

Think about how time-sensitive the expense is. Often, medical procedures, home and vehicle repairs, and funeral expenses can’t wait. 

Also, consider how the expense impacts your daily life. If the computer you rely on for work or job applications breaks, your income will be impacted unless you can quickly replace or fix the computer.  

I relied on my truck to get to work. Being without my vehicle long-term wouldn’t have just been inconvenient—it could have put my employment at risk. I also relied on my truck to take care of regular responsibilities like grocery shopping. The need for a running vehicle was, in fact, urgent.

4. You’re coping with unexpectedly reduced income

There’s one scenario where it’s ok to use your emergency savings to cover everyday non-emergency expenses—when your income is suddenly reduced. If you’re laid off or lose your job, you can use your emergency fund to pay for your living expenses, like your rent or mortgage, grocery bills, and other essentials. Temporary unemployment qualifies as an emergency. 

Unrelated to the truck situation, I was laid off from a job a few years ago. I relied on my emergency savings for my essential expenses until I was able to get another job.

Covering emergency expenses

You create an emergency fund for a reason. It’s important to avoid using it for non-essentials and expenses that you can otherwise plan and budget for. But don’t be afraid to use the fund when you really need it.

My emergency fund allowed me to cover my truck’s repairs without having to rely on a credit card or go into debt. After dipping into the fund, I focused on rebuilding my savings. Now, I know my emergency fund is replenished and available if I need it again.

Paige Cerulli contributed to this article.