There's a scene in the Pixar movie Up where the couple repeatedly dips into their savings to cover unexpected expenses. The car breaks down, a tree falls on their roof, and just like that, their hard-earned savings take another hit. For an animated movie, it's a remarkably accurate portrayal of how savings actually work!
Last month, we experienced our own version of this with our dog, Birdie. Between two unplanned surgeries and multiple specialist bills, we had to dip into our savings not once, not twice, but three times. Thankfully, Birdie is on the mend, but let me tell you, watching those savings balances shrink didn't feel good!
Here's the thing though, that's what savings are for! Sometimes we save for our future selves, sometimes we save for a specific purchase, and sometimes we save for life's inevitable rainy days.
Of course, knowing that intellectually doesn't always make it easier emotionally. So this week, I'm sharing a few reminders I give my clients (and apparently need myself!) about the sometimes painful reality of dipping into savings.
Labels Matter
Most financial experts emphasize the importance of building an emergency fund. And while I wholeheartedly agree with the advice to set aside savings for life's unexpected expenses, I've always found the language of an "emergency" a little hard to swallow.
What exactly constitutes an emergency? A job loss? A broken dishwasher? An unexpected vet bill? Who gets to decide what qualifies?
I prefer the term rainy day fund. It lowers the stakes and acknowledges a simple reality: unexpected expenses are a part of life, and that's okay.
It's Okay to Use Your Short-Term Savings!
Here's something I wish more people understood: It's okay to use your short-term savings. That's what they're there for!
To be clear, I'm talking about money set aside for life's irregular expenses, not long-term savings earmarked for retirement. Ideally, we leave retirement savings untouched until retirement, but if life requires you to access those funds early, that's not a personal failure either. Sometimes life doesn't give us ideal options.
When we acknowledge that irregular expenses are a normal part of life, we can give ourselves permission to use the money we've set aside for them and focus on what really matters: Can I replenish these funds?
The goal isn't to never touch our short-term savings (although wouldn't that be nice?). The goal is to have a system in place to replenish them when we do. This might mean setting up automatic transfers or building recurring savings contributions into your monthly finances.
Unexpected expenses will arise, they'll cost money, and we'll need to rebuild our savings afterward. Using your savings for their intended purpose isn't a financial failure. It's your financial plan working as intended.
I find it quite freeing to accept this reality rather than beat ourselves up over the inevitable irregularities of life.
A Little Reframing Goes a Long Way
So much of traditional financial advice focuses on building up savings, but there's often less discussion about what happens when we actually need to use them.
And when we treat those funds as something that should only be touched in a true "emergency," we risk turning an ordinary financial inconvenience into an emotional one, complete with guilt, anxiety, or the feeling that we've somehow fallen behind.
I'd rather we view our rainy day savings as a resource that's meant to ebb and flow. We build them up, life happens, we use some of that money, and then we work toward replenishing it. No financial shame spiral required.
Let Me Know
I'm curious how this plays out in your own financial life. When irregular expenses pop up, how do you feel about dipping into your savings? Is it an emotional roller coaster, complete with guilt and second-guessing, or can you take it in stride? And perhaps more importantly, does knowing you have a plan to replenish those funds change how you feel about using them in the first place?
Next issue, we'll get into the nuts and bolts of building your rainy day fund: how much to save, where to keep it, and how to replenish it when life inevitably happens.
