My husband wants to blow our emergency fund on a holiday: VICKY REYNAL replies

Do you have a question for our money psychotherapist? Email [email protected] 

My husband and I disagree on what we should use our emergency fund for. 

He wants to dip into the funds because we haven’t been able to save enough money to go on a summer holiday abroad this year but I am adamant that if we have an emergency fund it’s just for emergencies! 

What should we do?

Having an emergency fund is has practical implications and provides peace of mind

Money Psychotherapist Vicky Reynal replies: First of all I want to stress the importance of having an emergency fund. It’s not something that everyone manages to do but it’s an important component of financial resilience – in other words our ability to deal with unforeseen expenses and ultimately financial wellbeing. Why?

An emergency fund has more than just practical implications and isn’t just about having the resources to deal with an emergency.

It also provides the peace of mind that one can face adversity and gives a sense of security and stability, which is psychologically valuable.

Giving this up – even if temporarily – is a choice that cannot be made lightly. The price to pay may be high: You could go on holiday but feel anxious that if anything were to happen, you’d be left financially exposed and vulnerable.

Have you explored all other options?

Knowing that a pot of money is sitting in an account untouched may feel comforting but, as your husband shows, it may be very tempting too and feel like an easy option to resort to compared to others.

Have you considered making some big cuts to your budget for the next few months and to then go on a holiday later in the year; or finding a way to make a side income – for example selling a few items you would feel fine to sacrifice in return for a holiday.

I have seen clients all too often fall into the trap of black and white thinking. So what if instead of considering this as a holiday or no holiday dilemma, this year you acknowledge that you can’t take the type of holiday you are used to, but you could have a different holiday.

One with fewer days, fewer stars, closer to home, so that whatever you decide to compromise on would make it a cheaper holiday.

Of course, you have the freedom to jointly agree to make an exception and this time use some of the emergency savings funds (having exhausted all other options) to go on holiday. But there are some factors I would invite you to consider before making that choice.

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Is this a pattern?

Is this a new, exceptional suggestion from your husband or is this adding to a pattern of him trying to push the boundaries of your finances?

If he has in other ways shaken your trust when it comes to spending or saving, then I would be extra cautious about considering this option.

What about your personalities?

Most people use boundaries to make themselves feel safe from external threats, but for some people boundaries are there to keep them safe from themselves, from being ‘out of control’.

If this applies to either you or your partner, then being flexible could actually evoke a great deal of anxiety. It might even cause a knock-on effect of being less boundaried in other areas of finance or life.

What is the context?

Now if you really have no Plan B in case of an emergency, and dipping into this fund would really compromise your livelihood, obviously the holiday can wait. But I would also invite you to be honest when assessing the risk of an ‘emergency’.

Does it mean if your job is not feeling very secure at the moment or if your car has already broken down twice this year then you might have a sense that dipping into the emergency savings fund might be necessary sooner rather than later and so it may not be the time to be flexible on that boundary.

If you do decide to dip into the emergency fund 

If you do decide to use the emergency fund then some of my tips include:

Acknowledge together that this can easily turn into a slippery slope – and is thus something to be avoided for the financial wellbeing of you both.

Have a plan in place with specifics as to how you will replenish the emergency fund and contribute a certain amount each month for a set number of months towards the fund and cut spending on any agreed expenses.

Be explicit about the Plan B should an emergency actually happen. Will you borrow from family? Will you need to ask for a loan or use credit?

Think about maybe creating a Holiday Savings Plan together that can perhaps focus your efforts to save towards holidays next year.

You can have a budget in mind, and work out how much you’d need to reduce your monthly expenses by (if at all possible) to save enough each month to get there.

Sometimes, by breaking it down into monthly amounts and then by each taking the responsibility for making or saving half that money every month then it can feel less onerous than thinking of the one lump sum.

Do you have a question for Vicky? Email [email protected].

Vicky Reynal’s book, Money On Your Mind: The Psychology Behind Your Financial Habits, is out now at £16.99.