min read
· Posted on
May 3, 2024

You’ve built your emergency fund. Here’s how to use it

Now that you've built you emergency fund, you want to make sure you're making the most of it.

What's the key learning?

  • It's a good idea to keen your emergency fund in a high-yield savings account (or an offset account/redraw facility if you have a mortgage)
  • It's important to only use your emergency fund on "emergencies"
  • When you do use your emergency fund, rebuild it incase you need to use it again in the future

Cossie livs is bad enough on its own, but when life throws unexpected curve ball, it can really really pay to be prepared.

So after reading our article What is an emergency fund needed for?, you’ve got your act together and nailed down atleast three months worth of expenses. Boom.

That means when your dental check-up turns into a wisdom-tooth-removal-project, your only worry is your chipmunk look, not the hole in your wallet.

But once you’ve built the emergency fund, how do you make sure you’re using it properly? 

Where do I keep my emergency fund?

Frankly, the days of stashing cash under the mattress like our grandmothers did are long gone. The way we handle emergency funds today looks very different.

For many people, the easiest option is to keep the emergency fund in a high-yield savings account, and leave it there untouched.

You don’t want your emergency fund sitting in your regular spending account - it’s too tempting to dip into and stock up on La Roche Posay.

If you’ve got a mortgage, it might be more suitable to keep your emergency fund in your offset account or redraw facility (if you’ve got those). 

That way, your emergency fund can be reducing the interest on your mortgage when it's not being used… for emergencies.

What do I use my emergency fund on?

Emergencies! That’s exactly what emergency funds are for, so if you find yourself facing a job loss, medical bill or emergency repair, it’s time to pull out that emergency fund.

Tapping into your emergency fund when your fridge breaks down can be a much better option than whacking it on your credit card and being weighed down by the repayments.

But not everything is an emergency. For example, debt repayments, investments, and holidays… and the new winter coat are not emergencies. 

Yep, that bachelorette trip might have sprung up out of nowhere, butttt it’s not an emergency fund expense.

How do I rebuild my emergency fund?

Your emergency fund is a lot like your car - once you’re running low on gas, you need to fill it up again. Now, this can be tricky, especially if your financial situation has changed. 

If you’ve used up your emergency fund, and you’re hit with more unexpected expenses, you’ll likely end up with your head very deep in the sand.

Creating a budget, and cutting down on discretionary spending is the first place to start. 

Setting up your spending and saving tracker in the Flux app can help you track your money and understand where to save in under 30 seconds. 

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