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Should I reserve my "emergency savings" solely for times of unexpected unemployment, or keep these savings flexible enough to cover other unforeseen critical needs?

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Emergency funds are good to keep yourself out of debt, for whatever reason.

Job loss is a big place where an emergency fund can help you out. It buys you time to find another job before hauling out the credit cards for your groceries, falling behind on your mortgage and car payments, etc.

But it can just as easily be used for major car repairs, serious medical issues, home repairs, etc. ... anything that needs to be done quickly, and isn't a discretionary item.

The bigger your cash reserves, the better, especially now that the economy is bad.

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  • +1 You can never know what's around the corner, but you can make sure you're prepared for such situations.
    – bcmcfc
    Commented Aug 8, 2010 at 8:16
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    Ideally, your normal budgeting would be able to cover car repairs and home repairs. If you need to dip into emergency savings for those, then the problem is very expensive or you don't have enough budgeted for those categories.
    – firedfly
    Commented Aug 8, 2010 at 23:03
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    Also, make sure you repay yourself as soon as you can the "emergency" has passed.
    – bstpierre
    Commented Aug 9, 2010 at 0:38
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    An emergency fund should also be liquid cash (e.g. money market bank account) sufficient to cover 6 months worth of expenses while you recuperate, or look for the right new job, or to cover the costs of moving for a new opportunity.
    – SpecKK
    Commented Aug 9, 2010 at 23:02
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    I think the keyword here is 'non-discretionary'. If it's unexpected and you have to pay for it/get it done and you don't have the money in your regular account or savings account, it probably qualifies for a raid on the emergency fund.
    – Timo Geusch
    Commented Aug 12, 2010 at 17:56
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I think it is stated perfectly in the question, "unforeseen critical needs." You know you will need to buy new tires for your car, they are critical but not unforeseen. However, if a tree falls on your car and you need to pay the insurance deductible for the repairs it would be unforeseen. You should budget for the expenses you can plan for in advance like car maintenance and repairs. An emergency fund is for items that are out of the ordinary.

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  • Not just out of the ordinary, but unforeseen out of the ordinary.
    – RonJohn
    Commented Dec 13, 2016 at 23:18

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