• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives
  • 100 Words

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

6 Responsible Ways to Use Your Emergency Funds

By Sabado Domingo

emergency fundOpening a savings account for emergency funds helps individuals and families weather uncertain financial times. Without careful planning and a personal savings account dedicated to saving for life events, it can be difficult to manage a significant financial emergency, such as a job loss, essential home repair, or major illness. Money Market accounts and standard savings accounts are typically used as emergency funds. Just remember, it’s important to have easy access to your money when you need it, so make sure the account you use allows you to make necessary withdrawals without penalties. Start saving now to build up funds to cover at least three months of expenses in case of an unexpected emergency.

Avoid using emergency funds for everyday spending

It can be tempting to dip into your emergency fund reserves for a vacation or new car stereo. However, they’re there to serve as your safety net first. If you have other savings goals, open a separate savings account and plan accordingly so you can enjoy your vacation while retaining your emergency funds. Learn what to save for and how to spend your emergency funds responsibly with these tips.

Cover rent, food and essential bills

Whether you’ve had a roommate unexpectedly move out, experienced an increase in your housing payments, or are out of work for a few months, your emergency funds can help cover your basic needs. If you or your partner become unemployed, you can use your emergency funds to pay for essentials, such as rent or mortgage payments, food, power, water and gas. Estimate how much you need to save based on your living expenses and start building your security net in a personal savings account.

Make repairs after a natural disaster

Sometimes people experience temporary losses after a natural disaster, such as a flood, hurricane, tornado, or earthquake. In these cases, government assistance may not be available to help your family right away. Have emergency funds stowed away in an easily accessible personal savings account, especially if you live in a high risk area. This will allow you to feed and house your family or travel to a safe location in case of extreme weather conditions.

Set up a savings account for healthcare expenses

It’s no secret that healthcare costs have been on the rise for years. Even with insurance, an unexpected accident or illness can cost you thousands. In 2012, insured Americans paid an average of $2,200 of out-of-pocket expenses, such as co-payments and deductibles. If you have critical healthcare needs or want to save in case of an accident or major illness, make sure your emergency savings account has adequate funds available. You can also look into opening a health savings account (HSA) with your bank or financial institution. An HSA allows you to set aside money to pay for qualifying out-of-pocket medical expenses, tax-free.

Cover unexpected home or car repairs

Whether you have a busted water main flood your garage, need a new fuel injector for your car, or had a fallen tree damage your roof, dealing with home or car repair emergencies is never fun. But if you own a home or a car, you will inevitably have to face them. Plumbing emergencies can cost anywhere from $500 to $5,000, a new roof can exceed $10,000, and a new fuel injector can cost upwards of $3,000. Saving for life events like this can help you be prepared for the pricey, but essential, repairs.

Take advantage of a golden opportunity

Sometimes it isn’t bad news that warrants a withdrawal from our emergency funds. Once in awhile, you might come across a financial, business or personal opportunity that could change your life. Maybe you’re being offered a chance to invest in a promising start-up or that space you’ve wanted for your small business just went up for sale. Financial opportunities do not always last long. Sometimes we only have a short time frame to seize them. Having a robust personal savings account for major life events can help you take advantage of these opportunities as they arise.

Photo Credit: StockMonkeys

May 18, 2022

Comments

  1. 1

    Clarisse @ Make Money Your Way says

    When I got hospitalized, I used my emergency fund for my medicines, other laboratory tests and for my doctor fee for my monthly check-up. I’m just so glad that my health insurance covered my medical bill.

  2. 2

    Michelle says

    We mainly have an emergency fund to cover us for any large home repairs and to help us if we were to have a bad self-employment income month. It brings us a lot of comfort because we don’t have to worry (as much) about expenses popping up.

  3. 3

    Kirsten says

    Our budget covers us for unexpectedly high utilities or food costs, home repairs, car repairs, and health care. We basically aim higher than the minimums and then roll forward the extra every paycheck. If the house burns down, we might have some problems covering all that would be involved, but that’s where our real emergency fund kicks in.

    I’m not sure if use my emergency fund for a business opportunity, although I confess to thinking about it. Seems like starting a new business would be all the more reason to have an emergency fund.

  4. 4

    Nicole says

    Getting started on an emergency fund is the real problem for me. I know I have to do it, but I can’t work out when to start.

The Question of the Week:

Do you think credit unions are safer than traditional banks?

View Results

Loading ... Loading ...

Recent Posts

  • The Big Advantages of Natural Gas Appliances
  • Is a Master’s Degree in Education Worth It? 7 Key Questions to Ask
  • Comparing the Flat Tax, Fair Tax, and Progressive Tax Systems
  • Are Energy Efficient CFL Bulbs Worth Paying More For?
  • Black Coffee: Pushing the Panic Button
  • The Continuing Chronicles of Elaine, Part 10
  • 3 Ways That Make Credit Cards Vulnerable to Fraud
  • Common Financial Mistakes in Manufacturing (and How to Avoid Them)
  • Blind Taste Test: Does Bottled Water Really Taste Better Than Filtered Tap?
  • Black Coffee: Banking on the Future

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 40,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!

Popular Now:

  1. 1. 18 Personal Finance Facts About US Presidents
  2. 2. Credit or Debit: Which One Is Actually Better?
  3. 3. Why Buying Gasoline in the Morning Can Save You Money
  4. 4. Why Paying Off the Mortgage Early May Be a Big Mistake
  5. 5. What Defines True Financial Success?
  6. 6. A Georgia Teacher Shows Why It Always Pays to Read the Fine Print
  7. 7. Debt Elimination: The Pros and Cons of Dave Ramsey’s Baby Steps
  8. 8. Home Repair Scams: Here Are the 9 Biggest
  9. 9. Historical Gold & Silver Benchmarks for Wages and Commodities
  10. 10. 4 Good Reasons Why Some Quarters Are Painted Red

All-Time Most Popular:

  1. 1. 19 Things Your Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2023 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

© Len Penzo dot Com 2008–2023