Considerations for Dipping Into Your Emergency Fund

The AP reported that a Euclid, Ohio woman called 911 to report a crime. She had ordered eight pieces of chicken at a KFC drive-thru but the restaurant had given her only four pieces.1

“I want my chicken,” the woman was heard telling a dispatcher. She then requested that law enforcement come to the restaurant to assist in “getting all her chicken.”

Authorities responded to the KFC on Euclid Avenue, not to help the women get more drumsticks, but to explain that an incorrect drive-thru order is not a police matter.

Obviously, the woman was lacking in common sense when she placed the 911 call. But in her own defense she would no doubt say that at the time being shorted half her chicken order certainly felt like an emergency.

This kind of self-delusion can easily happen in financial matters.

One of the keys to long-term financial success is organizing your spending through a pre-determined budget. And one of the most important components of a household budget is your emergency fund. The rule of thumb is to set aside $1000 for unforeseen expenses, then adding to that amount monthly until it can cover 3-6 months of living expenses.

The emergency fund is intended to pay for things like unexpected home repairs, an unanticipated rent hike, or living expenses following an interruption in expected income.

But having a sizeable chunk of cash sitting in your checking account can be a source of temptation. And in order to get at it with a clear conscience, people can stretch the definition of an emergency.

Financial Planner Rachel Fox has compiled a list of things that often tempt people to unwisely dip into their emergency funds.

At one end of the spectrum are the things that are obviously not emergencies—these are luxuries to be saved up for such as a new iPhone, Taylor Swift tickets, or a vacation.

Next are the items that are legitimate expenses, but because they can be predicted, they should be planned for and funded through the budget. These include car insurance, memberships, and gifts. As Dave Ramsey famously said, “Christmas is not an emergency.”

Finally come the expenses that are compelling, but still should not be treated as an emergency. For example, when a family member asks for financial help, compassion is always appropriate. But it’s important to remember that you should not put your own family’s finances in jeopardy in order to bail someone out.

Also, debt is not an emergency. Paying it off should be accomplished with long-term planning and discipline. To the extent you can prioritize, paying off debt should be done without sacrificing the assets set aside in your emergency fund.

Life is full of unexpected challenges that come with financial consequences. When the next one of these pops up, you’ll be glad you saved your emergency fund for a real emergency.