4 times it's OK to dip into your emergency fund

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An emergency fund is built for times like these. Here's when to use it.

• During the coronavirus outbreak and resulting economic uncertainty, it's never been more important to have a cash emergency fund.
• If you find yourself with a sudden loss of income, emergency medical expenses, or other unexpected expenses, it's time to use your emergency fund.
• Note that emergencies will look different for everyone. So ask yourself: Is this expense standing in the way of your ability to live your daily life, earn an income, or stay well? If so, it's probably a good use of your savings.
• Learn more about Ally's high-yield savings account here »

From San Francisco to New York City, businesses like bars, restaurants, nail salons, and fitness studios are closing. In the process, hundreds of thousands of people are suddenly operating on a reduced income, or without one entirely.

This is what an emergency fund - at least three months worth of expenses in a liquid account - is built for. With an ever-changing global health situation and the simultaneous economic strain, many people with an emergency fund might find themselves dipping into it for the first time.

Emergencies look different for everyone. Before tapping your emergency fund, ask yourself: Is this expense standing in the way of your ability to live your daily life, earn an income, or stay well? If it's something you want more than you need, take a step back and plan for the expense later on. Keep your emergency fund for truly urgent expenses, whatever those are in your situation, as much as possible.

Here are a few common situations that justify dipping into your emergency savings account:

1. You or your partner face an unexpected job loss

According to the Los Angeles Times, about 18% of American workers have experienced lost hours or layoffs so far during the outbreak, and one in four households making less than $50,000 per year has experienced lost hours or layoffs. In addition to lost wages, layoffs could also cause lost health insurance - which could be especially problematic.

If you or your partner has lost a job or income due to coronavirus, now is an appropriate time to use your emergency fund to cover your living expenses: your rent or mortgage payments, bills, and groceries.

2. You or a family member falls ill

Medical coverage is one of the most expensive parts of the coronavirus, and while the test itself may be free, other medical care, like a resulting hospital stay or other necessary tests, won't be.

People who were suspected to have the coronavirus or who were diagnosed with it racked up huge medical bills, and even those with health insurance aren't immune from huge bills, Business Insider's Hillary Hoffower reports. If you or a family member gets sick - with the virus or otherwise - it's an appropriate time to turn to an emergency fund.

3. You were traveling or living abroad, and you need to make emergency arrangements

Flights are being cancelled, and borders are closing around the world. The New York Times reports that millions of Americans are still abroad, and those who are traveling may either need to find a way to either get home or stay abroad until the pandemic dies down. In these unforeseen and unprecedented circumstances, dipping into your emergency fund could be appropriate.

4. Your home needs an unanticipated and necessary repair

Home repairs don't always constitute an emergency - but to stay home comfortably, you may need to make them. True emergencies are things that can't wait, and are too large for your normal savings account to cover. Things like your heat going out, a refrigerator breaking down, or a hot water heater failing are appropriate uses for dipping into your emergency fund.

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