8 Expenses to Use (or Not Use) Your Emergency Fund On

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Life doesn’t always go as planned. If you run into tough times, an emergency fund could help you weather the storm.

But while experts recommend saving between three and six months’ worth of living expenses in your emergency fund, they’re not always so clear about when to spend this money.

To help you determine when to dip into your emergency savings, we’ve put together a list of legitimate expenses, along with some that don’t warrant using this account.

4 expenses that justify dipping into your emergency fund

Your emergency fund is just what it sounds like — savings that should only be touched in the event of an emergency. But life can be full of unexpected costs, especially if you’re not carefully tracking your budget.

Although you shouldn’t tap into your account too often, here are four scenarios when it could make sense.

1. Unexpected medical costs

A medical crisis — and the hospital bills that could go with it — is an appropriate time to use your emergency fund. Having this financial cushion could mean the difference between security and debt in case of injury or illness.

According to PBS, 38 million Americans have inadequate health insurance and 44 million have none at all. Even if you have coverage, your medical bills might add up to more than you expected.

Drawing on your emergency fund could be exactly what you need to get through this difficult time. It’s a good reason to build an emergency fund in the first place.

2. Expenses if you lose your job

One reason experts recommend measuring your emergency fund in terms of monthly living expenses is that it will be there for you if you lose your job.

“A job loss is another instance where you could use your emergency fund,” said Maria Scenna of American Consumer Credit Counseling. “You likely won’t have much (or any) income coming in, and therefore will need to use your emergency fund to pay for your expenses.”

Without an income, you might not have any choice but to draw on your emergency fund. Relying on your savings will be a more cost-effective option in the end than racking up high-interest credit card debt.

Do your best to replenish it once this period of unemployment comes to an end.

3. Urgent home or car repairs

If your roof is leaking or your car’s engine has died, you have no choice but to pay for repairs. In the event of urgent home or car problems, you should feel free to use your emergency savings.

“Things such as a flat tire, car accident, house flooding, and water heater bursting are considered emergencies,” said Kalen Omo of Kalen Omo Financial Coaching. “Emergencies are when events occur that result in something that needs to be addressed immediately, or it will affect your ability to live or perform things you need to survive.”

That said, you should plan for some home and car maintenance costs in your regular budget. Even though you can’t predict when you’ll need to fix something in your home, for instance, chances are something will require work eventually.

As a home or car owner, it’s savvy to plan for some expenses so that you don’t have to drain your emergency fund when they inevitably come up. But if you run into a true crisis, that’s why your fund is there.

4. Family emergencies

Finally, a family emergency is another legitimate reason to borrow from your emergency savings. Maybe you need to pay for a parent’s medical bill or help a grandparent move.

You’ll also need savings to get you through a tough time such as the death of a family member, in which you might need to fly across the country or help with funeral expenses.

It’s not enjoyable to consider these eventualities, but it’s still important to prepare for them. With no emergency fund on which to fall back, a stressful time like this could become more overwhelming.

4 costs you shouldn’t pay for with an emergency fund

Once you’ve built your emergency fund, you might feel like it’s sitting there, collecting dust (and a little bit of interest) in the bank. But that doesn’t mean you should draw on it whenever you want to spend a little extra.

After all, an emergency fund is about covering needs, not wants. If you’re thinking of using emergency savings for any of these four expenses, think again.

1. Shopping or vacations

“People shouldn’t use their emergency funds for vacations or leisure activities,” said Levi Sanchez, financial planner and co-founder of Millennial Wealth. “It’s meant to provide a buffer against unexpected expenses, not to be used towards variable or controlled expenses.”

It’s a good idea to save for a new wardrobe or a trip to the Bahamas, but you should do so in a separate savings account. If you bank online, it’s easy to open multiple accounts and earmark them for different purposes.

You might transfer a small amount from each paycheck until you hit your savings goal. But steer clear of the account labeled “emergencies,” no matter how much you feel you “need” to be sipping pina coladas on a tropical beach in January.

2. Holiday gifts

Holiday expenses can add up. According to the National Retail Federation, the average American was expected to spend over $965 on holiday gifts for friends and family in 2017.

Even though these expenses are unusual, they’re not unpredictable, so they don’t justify using your emergency savings.

“Predictable annual expenses, regardless if they are costly, should not come out of your emergency fund,” said Jill Caponera, consumer savings expert at Promocodes.com. “These types of predictable expenses should be budgeted and saved up for accordingly as to avoid running up a credit card bill and acquiring added interest costs, or tapping into your monthly rent or mortgage payment money.”

Prepare for holiday spending in your regular budget so you’re not tempted to spend from your emergency fund.

3. Starting a business

Although the internet makes starting a business easier (and cheaper) than ever, there are still startup costs.

Throwing caution to the wind to start your venture might sound romantic, but it’s not financially savvy. This kind of undertaking practically demands that you have a solid emergency fund on which to fall back.

Instead of draining your emergency fund to pursue your dream of entrepreneurship, consider waiting until you have more in another savings account. If it makes financial sense, you might also take out a low-rate personal loan.

4. Student loans

We love empowering you to pay your student loans as fast as possible, but not at the expense of threatening your financial stability.

Even if you’re making extra payments on your student loans, you should still focus on building an emergency fund, just in case. Once you’ve built a solid base, you can divert any extra money toward your student loan balance and chip away at it over time.

Avoid draining your emergency fund unless necessary

If you take away one theme from this list, let it be this: You should only spend money from your emergency fund when it’s necessary.

If your fund is sitting there, it might be tempting to spend it on nonessentials. Instead, consider yourself lucky that no major emergencies have come up.

Your emergency fund is meant to be a buffer between you and debt in times of crisis. It will give you peace of mind since you know you’re financially prepared for whatever life throws at you.

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LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
6.26% – 14.87%1$5,000 - $100,000Visit SoFi
6.99% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
6.99% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.