Emergency Fund Uses

[annibe11e]

What would you use your emergency fund for?

Every time I think about it, I seem to think of a new reason. So far:

Income interruption or reduction. Job loss, inability to work due to health, physical or mental. I wasn't too worried about physical health, especially working an office job, but I didn't consider mental health until my dad died. I couldn't function fully and had to work part time for a year. My wages did not cover all my bills and debt payments, so I cashed out my tiny retirement fund to keep me afloat. I still had to defer my student loan payments and the interest was then capitalized. My career also stalled, but an emergency fund can't help with that.

Major car repair that exceeds budgeted amount set aside to date. Something necessary to get to safely to work and back.

Auto insurance deductible following accident.

Funeral expense/travel. I learned this one when my dad died, too. At age 69. There was nothing set aside for his final expenses. We paid for a cremation, memorial service, and plane tickets for one of my children. It all went on credit cards.

We don't own a house, but if we did I would include major repair exceeding budgeted amount set aside to date.

Sedation for routine dental procedure. Around here, this is paid up front. Actually, in advance of the appointment. I don't use sedation anymore, but I did once because I was terrified. Someone with severe dentistry fears might want to keep money on hand for this.

This is crazy, but I actually keep money stowed in my emergency fund for concert tickets. Now hear me out. I am a HUGE fan of The Monkees. I have been since I was 8. That's 30 years! If you know much about them, you may know that it is incredibly rare for Mike to join the others on stage. I have never seen all 4 of them together. I had one opportunity to do this and I was BROKE. I didn't even have enough to charge a single ticket for myself on my maxed out credit card. Less than a year later, Davy passed away and I realized that had been my only chance. It was and continues to be heartbreaking.
So, why in the emergency fund? Because it's the only money I'm disciplined enough not to touch unless for something on my emergency list. No other money set aside would last, probably because it's uses aren't well-defined enough.

What am I missing? I'm sure there's plenty more...

[disneysteve]

The EF is primarily a job loss fund. The one and only time I've really dipped into it was in 2000 when I quit my job without another one lined up. We lived off of savings for just over 3 months.

The other main thing it is for is some major home catastrophe not covered by insurance. I'm not sure what that might be. Maybe a tree falling and wrecking the place or something like that.

We can cash flow car repairs, medical bills, and all the other typical stuff that can happen unexpectedly - as long as I still have my income, so it's mainly the income that I'm saving to replace.

[HundredK]

Funeral expense/travel. I learned this one when my dad died, too. At age 69. There was nothing set aside for his final expenses. We paid for a cremation, memorial service, and plane tickets for one of my children. It all went on credit cards.

This is one that I think not too many people consider. A friend of my got very sick at the age of 40 and nearly died. The first thing she did as soon as she regained her strength was to pre-pay for her funeral. She even picked out what type of flowers she wants. She said that she wouldn't want her relatives having to make those decisions and cover those expenses when she dies.

[disneysteve]

At age 69. There was nothing set aside for his final expenses.

This is way too common, and there's really no good reason for it unless the person is legitimately poor. Everyone knows they are going to die. Either have life insurance or have some savings earmarked for funeral expenses. This shouldn't have to come out of somebody else's emergency fund.

On the other hand, having to travel to attend a loved one's funeral might be a reason to tap the EF. A number of years ago, one of my aunt's died in Florida (I live in NJ) and I flew down to attend the funeral. That certainly wasn't a planned expense - airfare, rental car, hotel, meals, time away from work, etc. The whole process cost me a couple thousand dollars. I was happy to be able to do it, of course, but it wasn't cheap.

[annibe11e]

This is way too common, and there's really no good reason for it unless the person is legitimately poor. Everyone knows they are going to die. Either have life insurance or have some savings earmarked for funeral expenses. This shouldn't have to come out of somebody else's emergency fund.

On the other hand, having to travel to attend a loved one's funeral might be a reason to tap the EF. A number of years ago, one of my aunt's died in Florida (I live in NJ) and I flew down to attend the funeral. That certainly wasn't a planned expense - airfare, rental car, hotel, meals, time away from work, etc. The whole process cost me a couple thousand dollars. I was happy to be able to do it, of course, but it wasn't cheap.

My father actually committed suicide, so he knew he was going to die. We figured out that he was planning it for at least 5 months. It wasn't unexpected for him. That being said, that kind of pain usually keeps you from thinking outside of it. I'm sure not much else was considered by him for a long time.

Obviously I'm hoping that situation doesn't arise again for me, but I will consider those expenses for the purposes of funding my emergency fund since loved ones don't always take care of the things we think they should.

As I type this, I realize that I don't think my mother has any money set aside either. She also doesn't think she's going to physically die. Religious thing. I guess I'll have to talk to her.

That's what I love about this forum. Get's you thinking!

[disneysteve]

My father actually committed suicide, so he knew he was going to die. We figured out that he was planning it for at least 5 months. It wasn't unexpected for him. That being said, that kind of pain usually keeps you from thinking outside of it. I'm sure not much else was considered by him for a long time.

Very sorry for your loss. I hope my post didn't come off as insensitive. It was meant as a general comment, not specifically about your father.

[bjl584]

I'd consider using an EF for what I'd consider a true emergency that couldn't be covered by my normal checking/savings.

Paying bills during a job loss or injury.

Some unexpected major event like the furnace breaking or a major vehicle repair.

[annibe11e]

Very sorry for your loss. I hope my post didn't come off as insensitive. It was meant as a general comment, not specifically about your father.

I didn't think it insensitive at all. I was pointing out that there are circumstances under which people may not plan as we would hope/expect when it comes to final expenses, for reasons other than lack of funds. That's just the unfortunate way in which I learned to consider it for my emergency fund.

[thestrongprofessional]

Medical Expenses

As referenced previously, medical expenses are also a reason to tap into your emergency fund. Some medical expenses may not be covered by your insurance plans so its always good to have at least 3-6 months of expenses saved up.

Raphael

[Nutria]

As referenced previously, medical expenses are also a reason to tap into your emergency fund. Some medical expenses may not be covered by your insurance plans so its always good to have at least 3-6 months of expenses saved up.

We have separate Medical and Job Loss funds. Plus Appliance and Home Repair funds.

Of course it could all be tossed into one pile -- and in a Big Emergency, it would -- but having separate funds helps to keep money on hand in case two problems happen at once.

[Nutria]

This is crazy, but I actually keep money stowed in my emergency fund for concert tickets.

Yes, that is crazy. Bonkers, in fact.

Now hear me out.

No, because your sense of "emergency" is seriously flawed.

So, why in the emergency fund? Because it's the only money I'm disciplined enough not to touch unless for something on my emergency list.

You aren't alone...

No other money set aside would last, probably because it's uses aren't well-defined enough.

That's what you've got to do: define your wants, and how badly you want them. Then start saving for each of them sooner than later.

What am I missing? I'm sure there's plenty more...

Like an addict, you need to fall far enough down that you have a "Come to Jesus" moment and really begin to live below your means.

Also like an addict, you might occasionally fall off the wagon. Just get back on and keep trucking.

(My words seem harsh, but it wasn't until I was much older than you that my DW and I forced ourselves to get the disciplined needed to (1) not live beyond our means, and (2) be ants instead of grasshoppers.)

[cypher1]

Does anyone actually count their HSA as part of the EF? I think have 4500 left in mine. I contribute just over 2% of my gross income each year, and employer adds 500 I think.

I realize in a real medical emergency, it's a drop in the bucket. But for a surprised dental procedure, or other accident, I'd rather have a small fund in place.

[TexasHusker]

An emergency fund should be, by definition, for only true emergencies, such as a sudden illness. NCF, also known as New Car Fever, tends to strike me every 18-20 months. Thus, my emergency fund can be used for a new car to get rid of the fever.

[disneysteve]

Does anyone actually count their HSA as part of the EF?

I've only had an HSA for a few months so I never really thought about it but I suppose you're right.

I tend to think of my EF in general terms, not only for specific sorts of emergencies, but one of those possible emergencies is medical expenses, so the HSA is a portion of the emergency fund. It's just earmarked for only one kind of emergency. It won't help if the roof starts leaking but if my gallbladder goes bad, it would.

[cypher1]

It's just earmarked for only one kind of emergency. It won't help if the roof starts leaking but if my gallbladder goes bad, it would.

I agree for a limiting a specific type (in this case medical). But after seeing my relatives and even younger friends discovering new medical concerns, it makes me realize it's more of a matter of when I may need to use the funds, not if.

Keep in mind I don't consider medical the only reason for an EF. As I agree with the original poster, that any potential job loss, auto accident/deductible, funeral/travel expenses, emergency home repair/failure of appliances are still primary considerations.