Not too long ago, Principal.com released the results of a recent survey about financial health. One of the interesting tidbits in the findings was that nearly 15% of employees with an emergency fund had to tap into it recently in order to meet expenses.
The news that some people are still tapping into their emergency funds is an indication that many of us are still feeling the pinch. While there’s nothing wrong with using the emergency fund when you really need it, one of the things you can’t forget to do is to replenish it later.
Returning Funds to Emergency Savings
During tough times, it is not surprising that people have to draw on their emergency savings. Additionally, since many consumers are drawing on their emergency resources, it is not surprising to find out that they have also stopped contributing to their emergency funds. Whether the problem is a job loss, a medical emergency, or an unexpected expense, it makes sense to hold off on contributions while you are using your emergency funds.
However, once the emergency has passed, it’s important that you remember to add funds back into emergency savings. Your emergency fund isn’t a one-time thing. You don’t build it up, and then assume you’re done, and that you can draw on it indefinitely. If you have to use your emergency fund, you need to make sure that, as soon as you can, you begin rebuilding the fund.
Clearly, if you have had to draw down your emergency savings by a large amount, you won’t be able to just replace it (unless you end up with a windfall). Instead, you will mostly likely have to start building a little at a time. Make sure that you do so as quickly as possible, either by earning extra money, or looking for ways to cut back. The important thing is that you start rebuilding your emergency fund as soon as possible.
Your Emergency Fund and Your Financial Health
An emergency fund is likely the only thing standing between you and complete financial disaster. If you don’t want to have to rely as much on loans, and if you want to reduce the level of financial problems you have during a tough time, an emergency fund can help. However, it has to be there for you. When you tap into your emergency savings, they won’t be there next time. You have to make sure that rebuilding your emergency fund a priority if you don’t want to end up in trouble down the road.
Your emergency savings is vital to your financial health. Just as you made building an emergency fund a priority at one time, once you have used money in the account, you need to make replacing it, when the emergency is over, just as high a priority. And, if you have fallen off in your efforts recently, re-evaluate your current spending, and renew your commitment.
The economic troubles we have seen the last few years aren’t over yet, and you need to be ready for what could be coming next.