3 Ways to Avoid Using Your Emergency Fund!

emergency fund

You’re a rock star and have set up a fully-funded emergency fund. Bravo! There’s only one problem: you find yourself using your emergency fund every month because of “unexpected” expenses! How can you make sure that your emergency fund is only used for emergency purposes? Here are a few tips to help get you on the right track . . . .

1. Give your emergency fund a mission statement.

Why is it easy to spend money from your emergency fund when a budget category is depleted? It’s because you didn’t give your emergency fund a mission statement in the beginning – you thought the words “emergency fund” were enough!

No worries. I’ve done the same thing.

In order to protect your emergency fund from delivery pizza, give your emergency fund a mission statement. It could go something like this:

This emergency fund is to be used only in the case of a real emergency. A “real emergency” is constituted as (1) a situation where the well-being of a family member is at risk (like in the case of a spreading disease) if the funds are not utilized, (2) transportation to an income-producing job is diminished due to mechanical failure (like an oil leak that is somehow coming through your floorboard), or (3) shelter needs are no longer met due to unforeseen circumstances (like a tree through your roof).

Your mission statement may look different (probably should), and you could certainly poke holes in mine, but all of that is okay. The point here is for you to make it more difficult on yourself to justify the use of your emergency fund.

2. Allocate more money to your budgeting categories.

Another reason you probably use your emergency fund too often is that you don’t adequately fund your budgeting categories. I’ve heard people say that they keep their budget lean and mean because they have an emergency fund for miscellaneous expenses. That’s not an emergency fund!

My argument here is that people should create realistic budgets in order to avoid pulling money from their emergency fund. For example, instead of only including gas and oil changes in your Transportation category, include tire replacements, parking meter expenses, and occasional repairs too!

If you need budget category ideas, try my Budget Category Brainstormer – a printable worksheet with 80+ budget categories to get you started!

I’ll be upfront with you: this requires a huge initial time commitment. When you’re trying to come up with every possible expense for a certain category, you can become pretty drained. However, you shouldn’t give up! Beef up your budgeting categories and you’ll have little excuse to use your emergency fund for non-emergencies.

3. Make your emergency fund difficult to access – but not too difficult.

Dave Ramsey tells the legendary story of a person who framed their cash emergency fund in glass and wrote on it: “In case of emergency, break glass.” That’s pretty funny, and I wonder if they ever had to break the glass!

Making your emergency fund difficult to access is one way to make you think twice before using your emergency money. One way to do this is by opening up a separate savings account at INGDirect.com and nicknaming it “Emergency Fund.” In order to use your money, you’ll have to log in to your seldom used account, withdraw the funds, and wait for them to hit your primary checking account. This isn’t too difficult, but it adds a couple more steps than simply keeping your emergency fund commingled in your checking (although you can get some pretty sweet perks by having a lot of money in your PerkStreet checking).

At one time, when our emergency fund was small, we kept cash in a box . . . in another box . . . and finally, in a safe. Oh, and I almost forgot it was rubber-banded! Not very secure – we should have used duct tape! Ha.

Have some fun with this one, but make sure not to prevent access to your emergency fund. You don’t want to bury it in a glacier or give it to your second cousin who lives across the country. Don’t make it too difficult to access, or you might have a real emergency on your hands!

Do you have some tips for using your emergency fund with wisdom? Leave a comment below!

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  1. Jeff Ehrlich

    Good article.. A survey released in June of 2011 by bankrate.com said 24% of consumers have NO savings at all and 76% do not have the recommended 3-6 month cushion set aside for those rainy days ahead. People ask why have an Emergency fund when I have credit cards and equity in my home?? (Not so much these days..) So you won’t go further in debt, so you won’t borrow from your retirement account and so your life is not turned upside down when you get that speeding ticket. I agree that one of the best ways to keep from tapping the Emergency stash is to have a category savings account for yearly expenses to include birthdays and Christmas.. We did a video on our website talking about the importance of an Emergency Fund. Check it out…. http://www.debtfreesquad.com/lesson-3-the-importance-of-an-emergency-fund/
    Keep up the writing,

    • John Frainee

      Thank you Jeff for your kind words and information! Isn’t it amazing that so many people don’t have an emergency fund?

  2. Elizabeth

    my husband and I have several accounts set up in different banks around town. Our emergency fund account and our vacation account are inconvenient to get to and we don’t have a checks or debit cards for these accounts.
    I have a part time job and my little checks from this job go towards our vacation fund. Last June we (3 of us) were able to take a trip to Hawaii for 9 days. we saved for two years, so when it came time to make the reservations our trip was covered.
    I am so grateful that my husband and I are on the same page when it comes to our finances/savings/emergency funds.

  3. Liane

    Great post! We keep our emergency fund in a passbook savings account. We cannot access the funds electronically at all – we have to physically go to the bank with the passbook to withdraw the funds. We have strict guidelines as to what constitutes an ’emergency’ and we need to discuss any possible withdrawals from the account. I’m happy to say that we have not made any withdrawals, the account continues to grow, and it’s a comfort knowing that we have those funds set aside ‘just in case’.

  4. Carl Lassegue

    The mission statement is a great idea. By giving it a purpose and writing it down, you can consult the mission statement later when you are tempted to use it on something you shouldn’t.

  5. Paul

    Tnx for the tips. I agree that the Mission Statement is a great idea: puts some bounds on it.