I recently went to hop in my car and drive to class. But after wandering around the parking lot for several minutes, frantically pressing the panic button to no avail, I realized: My car wasn’t there.
I hadn’t picked up a decal before the new parking enforcement started in my apartment complex, so my car had been towed. And getting it back would set me back $175.
I rushed to the bank in a panic, feeling like I’d been punched in the stomach as I imagined the hit to my emergency savings. That account had grown over the last several months. It was finallylooking solid.
I felt so bad about the idea of dipping into my emergency savings that I borrowed money from a friend instead.
I recovered my car, but it left me wondering: What’s the point of keeping a rainy day fund if I can’t bring myself to use it when something actually happens?
To understand why I felt so guilty about tapping an emergency fund for, you know, an emergency, I spoke with a few financial pros — and they helped me pinpoint when it’s appropriate to use those funds and when it’s not.
Here’s Why I Felt Shame About Spending My Rainy Day Savings
First up: An emergency fund should be held separately from your general savings.
I get it. You’re probably groaning and thinking, “I have to stash even more money?! I’m barely keeping my head above water as it is!”
But Kerri Moriarty, head of company development for Cinch Financial, put it this way:
“Your savings are usually earmarked for a goal — like buying a home, taking a special vacation, or saving to launch your own business,” she said. “The expectation with savings is that you’ll eventually spend them on the goal you were saving toward.”
Given that perspective, it’s easy to see why I hesitated to withdraw money from my account.
I’d been tucking away a little each week and feeling proud about it. I felt financially responsible. Every time my weekly automatic transfer hit my savings, I’d think, “Look at me! I’m a responsible adult!”
The issue was that all that cash lived in one single account.
Because that account also functioned as my savings, the idea of blowing a chunk of it on an annoying towing fee felt wasteful. I would’ve preferred to spend it on that Greece trip I’d been saving for.
Moriarty says that splitting your funds into two accounts makes it easier to manage them purposefully — and to keep track of how close each is to its goal at all times.
“Something comes up where you need to use your emergency savings? Fine — but you should pause your goal-based saving until you rebuild the emergency fund. If they’re combined, it’s harder to know exactly where you stand,” Moriarty said.
So What Actually Counts as an Emergency?
Okay, now you (hopefully) see why it’s smart to separate your emergency fund from other savings. Good work!
But you know how life likes to throw curveballs? I love it too — until it leaves everything in chaos and disarray.
There are obvious times to tap an emergency fund, like losing your job, sudden bereavement expenses, or urgent home repairs like a leaking roof or a shattered window.
But what about those murkier moments, like my car being towed? When is it appropriate to pull money from an emergency stash to cover costs? Many financial advisors recommend asking yourself three questions about the situation:
1. Is it unexpected?
2. Is it urgent?
3. Is it necessary?
If you can answer “yes” to all three, it’s likely a valid time to use emergency savings. If you answer “yes” to one but “no” to the others, you might want to rethink it.
Let’s return to my example.
Was my car being towed unexpected? Absolutely.
However, it was also preventable. Did that mean I had to grit my teeth and drain the money from my monthly budget?
Gray areas like this are where the other questions act as tie-breakers.
My car is my main way to get to class and work, so I needed it right away. That made it urgent.
Most importantly, it was necessary. My professors probably would’ve docked class participation points if I skipped, and my employer might have fired me for missing shifts. No thanks.
Considering those three points, I should have used my emergency savings to get my car back.
Now, a different scenario: It’s Dec. 20, and you suddenly realize Christmas is nearly here (maybe you’ve been living under a rock for months).
You need to grab presents for Suzy, Stacy, Steve, Grandma Fran, your neighbor’s cousin, your cousin’s cousin, and so on. But yikes — you haven’t started shopping and your cash is low.
Is it necessary? If you want to stay in the family’s good graces, maybe. But realistically, you don’t need to buy for everyone and their brother, even though it’s easy to feel pressured into spending big during the holidays.
Is it urgent? Sure — the holiday is five days away.
Is it unexpected? NO! You had more than 300 days to plan and save for holiday gifting. So no — do not touch the emergency fund.
Every situation differs, but it helps to run through each question and look at the problem from several angles.
The Best Alternative to Using Emergency Savings
If you’re still unsure about withdrawing from your emergency account, hopefully you have another option.
Brian Davis, co-founder of the financial blog SparkRental, recommends using your checking account first and treating emergency savings as a last resort.
If you have discretionary funds in your budget that can cover the issue, consider using those dollars first, Davis advises.
He suggests rebalancing your budget afterward by cutting back on eating out and drinks, and streaming movies at home instead of heading to the theater.
However, if you follow a tight month-to-month budget and don’t allocate much “fun money,” this tactic might not be an option.
That said, if you’ve built an emergency fund, use it when genuine emergencies strike. Don’t feel guilty about it!
Life happens. And if you’ve prepared for it, you have every right to rely on that cushion when things go sideways — because we all know they will.
