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President Trump declares a National Emergency in response to the coronavirus pandemic. Americans are wiping out supplies at grocery stores to prepare for quarantine and we're back to a bear market--not just any bear, but an agitated grizzly. So is it time to tap into your emergency fund? Here are 4 reasons to use your emergency money during a crisis.
Coronavirus, or COVID-19, is the latest in a history of crises that have people debating whether they should tap into their emergency fund savings.

We talk about saving an emergency fund a lot, we even talk about when to use it. But the lines blur when you think about using it for a short-term crisis or other global panics.

This conversation isn’t just relevant for the thousands of people self-quarantining or for people whose employers have told them to stay home. Small business owners are closing their doors, Airbnb rental owners are suffering cancellations, and there’s less work for freelancers.

There are other types of crises you might need to tap into your emergency fund for as well. The 2008 recession created widespread panic, job loss, and financial distress for millions. And on a smaller scale, government employees recently went 35 days with no paycheck during the 2019 government shutdown.

Emotions can cloud your judgment, especially in situations that impact your livelihood. That’s why having an emergency fund, and a plan for using it in these unique circumstances, is so important.

Avoid Using Your Emergency Fund as Long as Possible

When your income is disrupted or you need to spend more money than you’re bringing in, don’t head straight to your emergency fund. Try everything you can to put off using it for as long as possible.

Related: Multiple Income Streams: 10 Ways to Earn Extra Income

Examine your budget. Look for ways to cut your spending and expenses to close the gap in your budget. Try a pantry challenge to use up the food you already have and cut all spending on non-essentials.

Get a recession-proof side hustle. During a recession, people look to save money by buying secondhand. Declutter your house and list items on Facebook Marketplace or eBay to make some extra money. During a self-quarantine, people will still have groceries, food, and alcohol delivered so Instacart and Drizzly could be a good way to supplement your income.

Avoid making impulsive financial decisions. Don’t make choices based on fear and speculation. Withdrawing money from your retirement accounts or pawning your jewelry will do more harm than good if you do it too soon. Take a step back and think rationally about the situation and your finances before making any decisions.

4 Reasons to Use Your Emergency Fund in a Crisis

If you do need to tap into your emergency fund during a recession or other season of panic, here are four things you should reserve it for that are unique to these times.

1. Build a Reasonable Stockpile

There’s no need to waste your entire emergency fund on 48 rolls of toilet paper and a cart full of nonperishable foods, but it is wise to prepare. If your budget can’t stretch to afford more than you need, pull out an extra $50 to $100 for a few weeks to build a reasonable stockpile.

For any staples that are on your grocery list use the “one for now and two for later” rule to gradually stock your pantry. Or if you normally buy a single or small pack of something, get the bulk version instead.

You can use the same rule when making freezer meals. Buy extra ingredients to prepare one for now and freeze one or two for later. Freezer meals aren’t just practical, they’re a way to incorporate fresh and healthy foods in your diet should your budget continue to tighten.

As you build your stockpile, make it a point to use up the fridge, pantry, and cupboard items you already have to lower your grocery bill and make room for more staple items.

2. Large Monthly Expenses

Prioritize your bills in order of importance for living. Your home, car, electricity, utilities, and phone are probably at the top of that list. Use any income to cover them from the top down and use your emergency fund to supplement what’s left.

For any other bills or debts, stop prepaying or paying extra and just focus on staying current. If you’re really struggling, some bills may not get paid, it’s not the end of the world. But try to stay as current as possible and maintain your credit score so you can bounce back quicker.

You’ll also want to stop retirement contributions for a little while. It’s not ideal but pausing contributions is better than going into credit card debt or missing bill payments.

3. Unexpected Expenses

Your emergency fund is made for unexpected expenses and unfortunately, they’ll come up even when times are already tough.

Whether your car breaks down, you get sick, or you encounter a necessary home repair, use the money from your emergency fund to cover the cost without hurting your regular budget.

4. When You Need to Talk

In 2003, SARS claimed 14 lives in Toronto and the city shut down as citizens quarantined themselves for weeks. A study found that after eight to ten days of quarantine 29% of people showed symptoms of post-traumatic stress disorder (PTSD) and 31% showed signs of depression. These numbers increased the longer someone was quarantined.

And data showed that The Great Recession was estimated to be responsible for at least 10,000 suicides from 2008 to 2010.

Quarantines are isolating and recessions are devastating but they are not the end of the world. If you’re experiencing increased anxiety, depression, thoughts of suicide or just need someone to talk to, find an online counselor that can help you process it. Your emergency fund money will be well spent supporting your mental health during such a stressful time.

Don’t Drain Your Savings if You Don’t Need to

Prepare for the worst but know that history has shown things work out for the best. When the stock market begins a steep decline, called a bear market, it usually recovers in about 22 months. While two years is a long time, it’s not forever.

Related: DR Podcast 320: How to Profit from a Stock Market Crash

Fear can make the most rational people do some crazy things. Wait for the facts before believing hype on social media and on the news. But more importantly, make sustainable changes now to safeguard your future and your emergency fund.

Don’t let short-term thinking affect your long-term outcome. If you stay rational and frugal you can make it through a crisis or recession as smoothly as possible.

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