I’m a Financial Planner: Here’s What I Recommend Clients Don’t Use Their Emergency Funds On

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Life can take twists and turns: surprise sickness, job loss and unexpected rent hikes can throw your finances into a tailspin. That’s why an emergency fund is an essential piece of your financial pie, no matter what your current financial status. But a recent CNBC and Momentive report revealed that of the Americans who have an emergency fund at all — fewer than half — 40% have less than $10,000.

With this limited amount of cash, it’s important to spend those savings wisely. Here are a few key items that you shouldn’t spend your emergency fund on.

Luxury and Entertainment

Looking to buy a new iPhone or Taylor Swift tickets, but feeling cash-strapped? Don’t be tempted to dip into your emergency fund for these expenses.

Rachel Fox, director of business development at Sunny Day Fund said, “An emergency fund is a savings account — or any personal fund you set aside — that gives you a way to withstand unexpected financial shocks.”

Fox warns that going to the movies or seeing a play don’t qualify as unexpected expenses, but instead should be deemed leisure spending. She advises that instead of dipping into your emergency fund, you should budget for these expenses separately.

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Like luxury and entertainment, Fox deemed vacations leisure spending. Which means, no matter how desperately you dream of hitting the beaches in Miami, it’s best not to dip into your emergency funds to pay for that vacation. In fact, blow your funds on a vacation and you could find yourself financially struggling should you incur an unexpected medical emergency or a sudden job loss.

“You can set up a separate savings account, or create a new ‘goal’ or ‘bucket’ in your existing account to track these funds separately,” advised Fox.

Monthly and Anticipated Expenses

Monthly and anticipatory expenses are expenses that you know you’ll have to pay. This includes cell phone, car insurance, your Netflix subscription and even your yearly income taxes. Fox advises that these anticipated expenses should be planned for along with your non-discretionary expenses like food and rent.

One way to budget for these monthly expenses is to follow the 50/30/20 rule. The rule suggests that 50% of your income should be put towards “expenses that are necessary for survival and basic well-being,” like food, rent and childcare. The next 30% of your income should be put towards wants, like that Netflix subscription. The rest of your income should be used for savings and debt repayment.

Helping a Family Member

A sibling gets into a massive financial bind: do you help them out? Fox admitted the conversation around using emergency funds to help family can be polarizing. “The best financial advice is just to not do it, because not only does it drain your own emergency fund but could create family dependencies,” she said.

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Fox also noted that “nearly half of those loans are never repaid.” She suggested that if you do decide to loan a family member money from your emergency fund, make sure you can afford it and don’t expect them to pay you back.


CNBC reported in May that “the average American has $90,460 in debt, [including] all types of consumer debt products, from credit cards to personal loans, mortgages and student debt.” While you might think that using emergency funds to eliminate debt is a smart choice, according to Fox, it’s not always that simple.

“Many debts require longer-term planning and payments, and there are several kinds of debt, like mortgages, that are typically considered ‘good debt,'” said Fox.

That said, Fox included exceptions: debt that puts you at risk of defaulting and debt that prevents you from creating an emergency fund in the first place. “For example, if you need to make an upcoming minimum monthly payment on a car loan and you also just happened to lose a source of income, then making that car loan payment could count as an unexpected expense for which you can use your emergency savings,” she said.

She also added that paying off high interest debt with emergency funds is okay if paying off your debt sooner means you’ll be able to put more in your emergency fund once that debt is gone.

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