When Should You Use Your Emergency Fund?

The economic recession caused by the coronavirus pandemic has left millions of people jobless or facing reduced wages. Throughout the year, numerous families have been forced to make difficult financial choices. For the few who managed to build an emergency fund, these savings have been invaluable. Still, it’s not always clear when you should tap your emergency savings. 

“Sometimes [emergencies] can be foreseen, but most often they come out of the blue,” Jim Wang, a personal finance expert who founded Best Wallet Hacks, told Discover.com. “It’s okay to use [your emergency fund]—that’s what it’s there for.”

No one could have predicted the pandemic or its subsequent downturn. According to a May 2020 AP-NORC survey, nearly half of Americans (49%) reported they or a family member had experienced a job loss, pay cut, reduced hours, or unpaid time off. 

To support Americans and the economy during this time, lawmakers approved comprehensive relief measures such as stimulus checks and the Paycheck Protection Program (PPP). Additionally, the Federal Reserve Board made a broad change to Regulation D by temporarily waiving monthly caps for savings deposits withdrawals or transfers. Banks and credit unions can choose to defer the limit but do not have to.

These uncertain circumstances are affecting negotiations for the next round of relief efforts. Not only that, but you might be wondering how you should use the money in your emergency fund. 

To guide you through this challenging time, Wang talked to Discover and offered a few tips about how to make the most of your emergency fund and what the Regulation D amendment means for you. 

Understanding How To Use Your Emergency Fund

An emergency fund is the money you save to cover unexpected expenses. This can be anything from replacing a major appliance to a car part to covering an emergency medical treatment. However, these expenses can be anything and happen at any time. So how can you determine when to tap your savings, particularly during an economic downturn?

Essentially, if it seems like the funds in your checking account aren’t enough to afford necessary living expenses like food or housing, then you should fall back on your emergency fund. Don’t use the money in this account to pay for nonessential purchases such as streaming services or subscription boxes.

“You really want to make sure you keep your emergency fund for emergencies that must be addressed right now,” Wang explained.

If you are thinking about when to use your emergency savings, then you should also assess where you can trim expenses. If you’re unsure where to start, review your monthly statements and take note of discretionary or nonessential purchases.

“While it may be hard to cut some subscriptions, just tell yourself that it’s only temporary and you can sign back up at a later time,” Wang noted.

Avoid using your savings to cover unnecessary purchases, even if you tell yourself you’ll supplement it with your next paycheck. During a recession or financially difficult times, that is the last thing you should do.

Make The Most Of The Regulation D Change

In April, the Federal Reserve temporarily lifted transfer restrictions on Regulation D, which initially limited consumers to six transfers per month. The change offers consumers greater flexibility with their emergency savings accounts. But as an optional amendment, it is up to individual banks and credit unions to uphold this limit.

If you have a money market account and were notified that you reached your transaction limit after a withdrawal or transfer, you already have experience with Regulation D. According to the Federal Reserve Board, consumers can now have an “unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent.”

If you use a money market or savings account to maintain your emergency fund, then this change is excellent news, especially if your financial institution is waiving the limit, too. This way, you can use the money in your account to alleviate your financial burden and pay for surprise or pressing expenses — without the added stress of penalties or account closures.

To determine the best way to use your emergency savings, contact your bank or credit union, and ask if they are following the Regulation D change. 


  • Summar, Todd. “When to Use Your Emergency Fund: Discover.” Discover Bank – Banking Topics Blog, Discover Bank, 17 Sept. 2020, www.discover.com/online-banking/banking-topics/when-to-use-your-emergency-fund/?ICMPGN=OS-BK-FOOTCON.


Ian Schindler