So You’ve Maxed Out Your Emergency Fund – Now What?

iStock_000001354642XSmallPersonal financiers will frequently advise that you have an emergency fund of 3-6 months of expenses in your bank account at all times. Saving up this chunk of change can take a long period of time, especially if you have a high expense to income ratio, which many people do (especially if you’re paying down debt). 

I remember a few months ago when I hit my $10,000 emergency fund target. I was so ecstatic for a brief moment, then I realized that the money was there, and it would stay there until I had an emergency, so other than my monthly interest accrual, there’s not much to be excited about.

I had to find another plan for all of the money that I was previously dumping into my emergency fund to get it up to that certain threshold. I was contributing hundreds of dollars each month to it, and now I could add that back into my savings plan or budget.

Once you’ve reached that goal and have a nice, healthy emergency fund in your bank, what do you do next? Spend all of your extra cash frivolously? Keep contributing to your emergency fund as if you don’t have a limit? Neither of these things were considered in my case. 

Here are some suggestions on what your savings focuses can be after you’ve met your goal:

A Vacation

You’ve spent the last several months saving for an emergency fund. You may want to continue saving but also went to have a little fun with your money. Why not save up for a vacation? You’ll reach your goal a lot more quickly than you did your emergency fund goal, and you’ll be able to both save and enjoy yourself.

Plus, there’s nothing like rewarding yourself for doing so well. If you’ve been disciplined enough to meet your goal before actually experiencing an emergency, you need to take some time to pat yourself on the back.


Instead of blowing the cash that you are used to putting away after months of saving, why not put it toward your retirement? Revel in the fact that with every payment you make to your retirement savings account, your days slaving away at work in a dead end job dwindle.

If you start contributing more now, you will have to contribute less later when you will want (or have) to spend your money on other things.

Pay Down Debt

Hopefully you don’t have any debt, but if you do, you should skip over the vacation and start paying it down with the money you are introducing back into your cash flow. If you don’t have any consumer debt but still have a mortgage, don’t forget that your mortgage is debt! It’s a large, forgettable debt that can cause you to incur an ugly amount of interest.

Why not pay it down when you’ve maxed out your emergency fund? You won’t miss the funds because you’ve been saving for so long, so you might as well take extra steps to financial freedom. Can you imagine life without having to save for an emergency OR put money toward a mortgage?


Maybe you aren’t very happy in your job and you want to go for some retraining. Education is expensive, so once you max out your emergency fund you’ll have some free cash to go back to school (if you want to). Take advantage of the opportunity of having free cash flow before it all has a purpose.


A great option for any free cash that you have kicking around is to invest it. You choose the investment vehicle and type with which you are comfortable, and invest away. You might as well make that  money grow.

Have you maxed out your emergency fund?


So You’ve Maxed Out Your Emergency Fund – Now What? — 11 Comments

  1. I’ve often thought about what we do if we maxed out our emergency savings. There are so many things we can do since or ES we have now is going to pay off the mortgage. We will have to build it back up again once we wipe it out. In reality though, there’s always something to pay for. A trip is due for us back home to the UK so that’s where any extra money will go.

  2. If I would ever get my emergency fund to the amount I’d like it (There always seems to be something that prevents that from happening, though), I’d redirect those budgeted funds to my retirement funds immediately. We have a different budget fund for vacations, so there’s really be nowhere else to put the funds other than increase our weekly spending – and I have no need to do that!

  3. Tammy and I have worked so hard on all our funds including the E-Fund. I feel a vacation coming on, an extended one. Then back to work on investing and paying down remaining debts! Have a pop off of a day, Daisy!

  4. Personally, if I just reached my emergency funds goal, I’d still continue to play it safe for a while. I wouldn’t go on a vacation or spend it elsewhere. What happens if you have an emergency and have to dip into the fund? You’ll need to replenish. So, I’d invest it elsewhere most likely in a slightly riskier investment (but nothing to risky that I could lose a significant amount of the principal).

  5. Check, Daisy! We have our emergency fund in place! We are planning a vacation – a real one, finally – not one that is just a “Well, we really couldn’t afford ______, so we settled for _____.” After paying off two student loans, our Visa balance, and our small home mortgage, we feel we need a break. We’re still contributing to IRAs and also added extra money per month to our larger mortgage on the house. What we are going to tackle next is paying off our car and then watch out mortgage because I’ve got my eye on you. Great post and not your run-of-the-mill ideas, Daisy!

  6. Good ideas; I somehow assumed that most aware people would view the ’emergency fund’ as a step on the way to financial health but may be I was wrong. Also, we operate a system in which we have no ’emergency fund’ as such – it is more a staggered account system where there is always some money held in an easy access account (investment purgatory, if you wish’.

  7. Uhhh…three to six months? If you meet that goal, then “what next?” is to keep adding to it until you have enough to meet at least a year’s worth of expenses. In today’s Brave New World, it could take you that long to find a new job after being laid off the one that’s funding the emergency savings…and even if it doesn’t, the next job may not pay what the current one does. In that case, it would be good to have some back-up money to tide you over until you learn to live on a much tighter permanent budget.

  8. We don’t have an emergency fund, but we do have an emergency plan and we have liquid savings. Unexpected expenses don’t have to be emergencies, but they do need to be covered.

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