When It's Okay to Use Your Emergency Fund (Even for Non-Emergencies)

Normally, I don't touch my emergency savings unless I really have to. Here's why I strayed from that rule recently.

Saving for emergencies is something I've been doing for years. In fact, ever since I started babysitting during my teenage years, I always made a point to stick a substantial chunk of my earnings into a savings account so it would be there for me on a rainy day.

As a general rule, I won't touch my emergency fund unless I'm looking at an unplanned expense I can't pay for another way. For example, years ago, I got into a minor car accident that resulted in my vehicle getting totaled. It wasn't a great car to begin with, but once it died on me, I had to scramble for a down payment on a new one so I could get to work and function. In that situation, I didn't feel guilty raiding my emergency fund -- even though I was bummed to have taken such a big withdrawal.

But recently, I tapped my emergency fund for a home improvement project that wasn't an emergency at all. Here's why I did it.

When you overfund your emergency savings

For most people, an emergency fund with three to six months' worth of living expenses offers solid protection. But I like to have an even larger cushion.

In fact, I like to have about a year's worth of bills in my emergency fund. The logic is that because I'm self-employed, I'm normally not entitled to unemployment benefits. So if I were to lose my job, I'd have zero income until managing to find a new gig. Also, my income is variable, and I like having added protection for that reason alone.

I had a year's worth of living costs in emergency savings before the pandemic. But once the crisis struck, I decided to ramp up my savings even more. After all, I had no idea how the pandemic would impact my workflow and how having my kids in remote school (which was our situation for the past academic year) would impact my ability to keep earning.

But now, things are looking better as far as the economy goes, and I've also learned that it's possible to get work done even when you're simultaneously managing school in your basement. As such, I recently took a small withdrawal from my emergency fund to cover a home improvement project we'd been putting off for a couple of years.

Now I did have other options for covering that expense. I could've dipped into my family vacation fund, but I didn't want to do that and leave us with less money to travel. I also could've applied for a home equity loan or line of credit, but doing so would've meant paying interest on that sum, and I didn't think that made sense when I had extra money sitting in an emergency fund.

To be clear, emergency funds should normally be reserved for just that -- emergencies. But if you're in a situation like me where you really went above and beyond in pumping money into yours, then you should feel free to take withdrawals for non-emergency situations. This especially holds true if the alternative is borrowing money and racking up interest or having to deny yourself something you've earned when the cash is sitting right there.