When Is It OK to Tap Your Savings?
An emergency savings account is an extremely powerful financial tool. However, once you have one, the question often arises as to when it's appropriate to use the money you've saved in that account. Given what a pain it is to build a good-sized cushion, you certainly don't want to spend it frivolously -- but some people get so protective of their savings accounts that they don't spend even when they should. An expense that qualifies as an emergency will meet the following four criteria.
Some expenses are obviously unavoidable. If your kid breaks his wrist while skateboarding, he needs medical treatment -- no question. Other expenses are just as obviously not necessary; no one requires a trip to Disney World. However, many expenses fall into the gray area in between those two extremes and they can be difficult to categorize. For example, whether buying a new suit for work is unavoidable depends on the circumstances. If you already have a dozen perfectly good suits, a new one's unlikely to qualify as unavoidable. On the other hand, if you just got a new job that requires a suit and you don't own any, a new suit is in fact a necessity.
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Source: Fool.com
