What to Ask Yourself Before Investing in Your Emergency Fund
You know it’s important to have emergency cash, but when can you dip into this aptly named emergency fund ? Some scenarios are so obvious that you lose your job and have to pay rent, but others can be unreliable.
A few weeks ago, my cat had a minor health problem that cost me $ 1,000 in vet bill (uh). This was unexpected and my checking account did not have enough funds to cover it. As painful as the bill was for me, poor Theo suffered even more. For me, the answer was obvious: plunge into the old emergency fund. That’s what it’s for, right?
However, in other scenarios, you may not be sure that investing in your emergency fund is the right move.
Let’s say your car breaks down. Is this considered an emergency? For some people, the answer is a definitive yes. For others, it depends on the circumstances. Maybe you can use public transportation while saving up. Maybe you can go for a swim in the car. As with many questions about money, the answer depends on your personal situation. However, here are three questions to ask if you are unsure whether you should invest in your emergency fund or not:
- Can I save up for this? Is it possible to save on these costs within a reasonable timeframe?
- Is there an alternative to losing money? For example, if your car breaks down, can you use public transport while saving up for repairs?
- Will it cost more if I postpone my payment? For example, if you need a dental job, would it be more expensive if you put it off until you save up for it?
You can use them as a starting point for making a decision. Of course, if you’ve been investing in your emergency fund month after month, it’s probably time to adjust your budget .