When to Use Your Emergency Fund

Tips to Help You Navigate How and When to Dip into Your Cash Reserve

In the midst of any financial uncertainty, you may be considering ways to pad your cash flow—whether that’s pausing or borrowing against your retirement account (psst, we recommend against that), tightening your budget, or taking a better look at your investments. 

What counts as an "emergency"?

If you’re experiencing an emergency and don’t have enough cash to cover your expenses, you might find yourself in a time when it’s appropriate to use your emergency cash fund.

True emergencies for which we recommend using your emergency cash reserve include job loss, unexpected surgery or other crucial and timely medical expenses, car trouble, emergency home repairs, and unexpected necessary travel. Ahem, don’t be tempted to dig into your emergency cash reserve for non-emergency items, whether small (e.g., back-to-school clothes, latest Apple product release, vacation) or large (e.g., new car, new home, wedding). 

It’s also important to remember that your emergency cash reserve isn’t a checking account or a savings account. You’ll still want to save for long-term financial goals, including retirement, outside of this fund. And, when you extract funds, make a plan to replace them, once you’re able to comfortably do so. 

As you rebuild your fund, remember that everyone’s emergency cash reserve may look different. We recommend saving two to three months’ worth of expenses in your fund (or more, if you’re able to do so). That way, if disaster strikes, you’re prepared. 

While it may sting when you dip into your precious cash reserve, remember: this is what it’s for! This is a stop-gap solution to help you make it through a temporary rough patch.