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This Is How to Never Deplete Your Emergency Fund

It's great you have an emergency fund, but using it for non-emergencies can mean the inability to cover a real emergency when it happens.

This Is How to Never Deplete Your Emergency FundAn emergency fund will help you cover your living expenses when you face a decrease or loss of income. In some instances, an emergency fund can be used to cover an immediate expense that you’re unable to cover from funds in your checking account.

It’s a great thing to have an emergency fund but the reality is most people don’t.

According to a survey, “approximately 58% of Americans have less than $1,000 in their savings accounts and 32% don’t even have a savings account.” The reasons vary. Some people feel they can’t afford to save, whereas others downplay the importance of saving or put it off until later.

But while some households lack a sizable savings account, you might have an emergency fund for life’s unexpected surprises. It might not be a six or eight-month fund, but it’s more than the average person’s account.

Building an emergency fund from nothing takes time and effort.

In fact, this might be your hardest financial challenge. But the challenge of growing a cash reserve may not compare with the willpower it takes to keep money in this account.

After sacrificing extras and luxuries to build your account, it’s tempting to dip into your emergency savings. The occasionally teeny-tiny dip may not have a huge impact in the long run, but you can run into problems if you’re unable to keep your paws off the account. It doesn’t matter if it’s been years since a “real emergency,” the worse thing you can do is deplete (or nearly deplete) your funds.

The more cash you have, the easier it’ll be to survive rough times. Fortunately, there are several tricks and strategies to ensure you always have enough in the account.

1. Understand the definition of an emergency

It’s important to understand what an emergency is, and what it’s not. An emergency is when you need immediate funds to take care of an urgent matter. This is a situation that you can’t put off until a week or later. You need cash, and you need it now. Maybe you lost your job or can’t delay a home or car repair due to the risk of complications. Or maybe you need to pay off a creditor immediately to avoid a collection account.

An emergency fund, on the other hand, is not a backup plan for when you want to have a good time with your friends or an extension of your income.

An emergency fund is primarily used as a means to cover your monthly expenses in the event you lose your job or hours at work are cut. At the end of the day, it’s your money and you can do what you want.

But if you start withdrawing money from this account for non-emergencies, you may not have enough cash for a real emergency, at which point you might have to rely on credit cards.

2. Get a separate account for other expenses

Money in an emergency fund should only be used for an emergency—period. If you have other plans that require a large sum of cash, such as buying a house, a vacation, or home improvement projects, set up separate savings account for these goals.

Understandably, your money only goes so far. What you can do is deposit half or a third of your disposable income into your emergency fund and the remaining funds into a separate savings account. This way, you can continue to grow your emergency fund while planning for other goals.

Ask your bank or credit union about opening multiple savings accounts and titling them for specific reasons. If you can’t find a savings account that serves this purpose, consider online savings accounts or apps.

3. Don’t make it easy to access the funds

Keeping your emergency savings account in the same bank as your checking account is asking for trouble. The accounts are probably linked, which makes it easier to withdraw money from your savings. You should keep your emergency fund as inaccessible as possible, preferably with a bank not directly tied to your checking account.

If you’re more concerned with minimizing impulse withdrawals than same-day cash, online savings might be the way to go. Plus, these accounts usually earn a higher yield than other types of savings accounts, helping you get a higher return on your money.

Having an online savings account helps curtail impulse buys and needless withdrawals. But, this also means you won’t have access to same-day cash in the event of an emergency, so take this into consideration.

4. Don’t stop adding funds to the account

Hitting your goal of a three to six-month cash reserve doesn’t mean you should stop building your emergency fund. You don’t need to add as much to the account every month, but you’ll want to continue growing this account. You don’t want a single emergency to completely wipe out your funds. By continuing to add money to the account, you increase the likelihood of having a surplus once you take a big withdrawal.

Are you tight with money and can’t find the extra dollars in your paycheck? Take a look at various side hustles to help you make extra cash to add to your emergency savings.

5. Tap your account as a last resort

If you need a car repair, your first impulse might be to get money from your emergency fund. But while your vehicle needs attention, does it require immediate attention?

Ask yourself if not having the vehicle repaired right now may cause work-related issues and impact your income stream. If not, could you possibly hold off a week or longer until you receive a few more paychecks? If you save up, you might avoid tapping your emergency fund altogether.

Of course, you can always borrow from your savings and pay yourself back. But even if you have good intentions, those funds might never make it back into your account. This is why I recommend a rainy day fund too.

6. Don’t use your funds to solve other people’s problems

Your emergency fund is your personal financial backup plan and not a solution to everyone else’s financial problems. It’s loving and kind to help a friend or relative going through hard times, but you have to consider the impact on your personal finances. Will helping this individual put a serious dent in your emergency fund? Do you doubt this person’s ability to pay back the funds?

This is your choice, just make sure your decision isn’t entirely based on emotions. As a rule of thumb, only lend money you can afford to lose.

If you haven’t begun saving, now’s the time to get serious. Commit to paying yourself first and save every windfall you receive.

And if you already have an emergency fund, never stop saving into this account.

Want help saving money? There are many digital financial assistants that can assist, apps that allow you to easily set up multiple savings goals, and accounts with high-interest rates.

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