It is a truth universally acknowledged, that a person in want of a good fortune must be in possession of an emergency fund. Hilarious literary allusions aside, the emergency fund — or rainy-day savings, or whatever you want to call it — is one of the bedrocks of basic personal finance. A solid savings account is like self-insurance; it can offer some protection when life seems intent on drowning you with one financial crisis after another.

But what is an emergency? That’s what Natasha wants to know. She writes:

As far as my emergency fund is concerned, what is actually considered an emergency? I just got an unexpected dental bill in the mail and I was wondering if I should just dip into my emergency fund to pay it instead of doing a monthly payment plan. I really don’t want that bill lingering around for months. I’d rather just pay it and get it over with since I have the money. What do you think?

This is an interesting question, and one I’ve thought about a lot lately. Since I started managing my mother’s money in July, I’ve had to make several similar decisions: For instance, should I maintain her savings account or pay off her car loan? (I chose to pay off the car loan, but that’s because I know we three sons are there to offer financial help if a big emergency arises.)

How do you decide what is and what is not an emergency?

Sometimes the answers are easy, of course. A vacation to Florida is not an emergency and should not be funded from your emergency fund. New boots are not an emergency, and neither is a new videogame console. On the other hand, if your only car is totaled, buying new transportation is an emergency. Or if your son breaks his leg, his medical expenses are an emergency.

But what about all the stuff in between? What if your computer dies? Is that an emergency? Or should you just go to the internet cafe? What if the garage roof starts to leak? Or, as in Natasha’s case, what if you have an unexpected dental bill?

Ultimately, I think the key is to decide for yourself what you emergency fund can be used for and what it can’t. But once you make that decision, stick to it. If I were in Natasha’s place, I’d absolutely use my emergency fund to pay off the dental bill. Why? Because:

  1. It sounds as if not paying the dental bill is going to nag at her. To me, this is a sign that she ought to prioritize the bill. I’m a firm believer that when making financial choices, you should first defeat the debts that bug you most.
  2. She has the money available to make the payment. If she had to borrow money to pay the dental bill, my advice might be different. But she has the cash saved, so why not use it?
  3. Last of all, to me an “unexpected dental bill” is an emergency.

So, if this were my decision, I’d pay the bill.

What would you do? Do you think it’s okay for Natasha to tap her emergency fund to make this payment? If not, why not? More to the point, what does constitute an emergency? What things do you use your emergency fund for? Is a credit card an emergency fund? What things do you refuse to pay out of your rainy-day savings? How do you keep yourself disciplined enough to know when something is actually an emergency?