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4 Things To Consider Before Spending Your Emergency Fund


Nowadays, having an emergency fund is an absolute necessity. Over the last few decades we have seen how fast someone’s financial situation can change. An emergency fund, like the name implies, is an amount of money reserved for unexpected expenses. In some cases people see themselves in the need of taking money out of the emergency fund to pay for medical bills after an accident. In others, people are forced to rely on their emergency funds after losing their jobs. No matter what the reason is, having an emergency fund should be a priority for anyone. If you already have an emergency fund, the next step is to learn how to use it wisely. Spending money from the emergency funds on things that are not unexpected or absolutely necessary will deplete your reserves and when a real emergency comes up you will not be ready for it. 

How much should you have in your emergency fund?

The first question that people who do not have an emergency fund ask is, “How much should I have in my emergency fund?”. Knowing exactly the amount of money that you need to have in your emergency fund is one of the most important things to do before starting to save. The amount of money necessary to have in an emergency fund is directly proportional to your monthly expenses. 

Typically, your emergency fund should be between three and six times your monthly expenses. For example, if you spend $3,000 a month on bills, food, rent, mortgage payment, insurance premiums and other essential expenses, your emergency fund should be at least $9,000. Right now, you are probably thinking that three to six times your monthly expenditures is a lot of money and, it is. But don’t worry, nobody expects you to save such an important sum in little time. Nonetheless, discipline is essential when it comes to building an emergency fund. You can begin by saving $5 every day, or you can transfer a small portion of your paycheck into a bank account dedicated only for your emergency fund. It does not matter which way you prefer, what really matters is consistency.  

What should you spend your emergency fund on?

The emergency fund should only be used for unexpected expenses that are considered an emergency. Not having the financial solvency to cover these unexpected expenses could negatively affect your quality of life, put yourself in danger or cause discomfort to you and your family. Some of the most common emergencies are house and car repairs, sudden unemployment and medical bills. But of course, there are many more things that can be considered an emergency and will require you to use money from the emergency fund. However, you must avoid spending money on anything that is not an emergency or an unforeseen expense. That new pair of shoes on sale at the mall, for example, is NOT an emergency. Be cautious not to spend money from the emergency fund on frivolous items.

Identify necessary and unnecessary spending

Another useful tip is to learn to tell the difference between necessary and unnecessary spending. For example, what happens if the stove in your house suddenly stops working and you need to replace it? Well, it is an emergency, because if you don’t replace it, you won’t be able to make food. Nonetheless, buying an expensive top of the line stove is not a necessity, you might want to look at a more affordable stove that can be used while you save for a nicer one for the future. Try to use the emergency fund only for things that are strictly necessary.

What are unexpected expenses?

  • Medical expenses: Depending on the severity of the injuries inflicted or the disease that someone is suffering from, medical expenditures might be exorbitant. A slip and fall accident can cost you thousands of dollars, and while you may be able to file a personal injury claim against the negligent party, you may not be rewarded for a long time. During that period of time you will have to pay out of pocket for the medical expenses. 
  • Unemployment or pay cut: Losing a job is a scary situation, especially if you have a family who relies on your income. Rent, utility bills, car payments, and other expenses do not wait for you to find a new employment. If you are unprepared, losing a job or having your wage cut can have a significant impact on your and your family’s quality of life. Having a cushion for a couple of months will give you priceless peace of mind. 
  • House or car repairs: If your car breaks down in the middle of the night, you may have to pay to have it towed as well as the expense of repairs. These repairs can be highly costly, and putting them off only makes the situation worse. Similarly, house repairs can become very expensive and in some cases they are urgent. Imagine not having money to repair your furnace during winter or having a massive leak on the ceiling that is damaging your property. Those situations can become very stressful without an emergency fund. 
  • Unplanned travel expenses: Sometimes people need to make a last minute trip to another city or country due to a family situation. Of course this kind of trip is not for vacation but it can probably be very costly. Without an emergency fund it could be difficult to get to your destination in time. 


Building an emergency fund might be difficult and time-consuming, but it is well worth the effort. The world is continuously changing; sometimes the economy is thriving, and other times it is in shambles. When the latter occurs, it is best to be ready for adversity. If you haven’t started an emergency fund yet, you should make a strategy that you know you can stick to. Once you have an emergency fund, make sure you only utilize it for the proper purposes so that future mishaps won’t become a catastrophe.

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