Know how to use and replenish your emergency fund

Once you establish your emergency fund, define guidelines for using and replenishing your money.

First, determine what constitutes a real emergency. Replacing tires on your car, a ruined computer from a leak in the ceiling or cracking your tooth are difficulties you could encounter. Certainly, each situation requires attention and may mean spending money. However, you may be able to put off purchasing new tires if you live on campus or can use public transportation. Replacing a computer may be necessary now or soon. A cracked tooth, on the other hand, requires immediate care.

Next, before using your emergency savings, ask yourself :

• Is it really an emergency? Plan to save throughout the year to cover costs that occur on a regular cycle like car insurance or holiday presents.
• Is it a want or a need? Needs like shelter, food and safety are essential and make up the basics of life. Wants might include off-campus housing, dining out or the newest technology.
• Do you need it right now? For example, you could justify putting off car repairs if you live on campus or can use public transportation.

When you need your emergency fund, take pride in using your savings for its intended purpose. Then use your saving strategies to replenish the funds. Depending on the situation, you may need to replace the whole fund. At least you now know you can save, and you may be able to prevent emergencies from escalating.

 

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