Probably the biggest use of our emergency fund has been as float for things that are going to be reimbursed. I put business expenses such as travel on my credit card and then get reimbursed a few months later. Having the emergency fund means that I don’t have to pay credit card interest on that money while I’m waiting for the university to reimburse me.
I’ve also had to use the emergency fund when someone has screwed up on payroll. Sometimes it takes a while to get paid… you get paid eventually but a paperwork error could mean you have to wait two weeks or a month or even longer until you get the check you were supposed to get. Or when the credit card company screws up and direct debits you twice for the same month. (Grr.)
Back in graduate school that use of the emergency fund was even more necessary as such expenses were a much larger portion of my income. Income has thankfully since gone up much more than my reimbursable expenses and occasional paperwork catastrophes, but I still shouldn’t lock too much away each month.
Having such a fund is probably most important if you don’t have access to the relatively cheap credit of credit cards. DH’s relatives have been having trouble getting the Pell grant to pay for textbooks. It would be easy for us to have them buy the books at the student store and have us reimburse them for receipts… except they don’t have the spare $100 or $200 to float. So if we do end up buying the textbooks we’ll have to order them directly online and make it an even longer time before Relative1 gets her required texts. (3 weeks without already…)
They live in a state with tight controls on payday lending. This is a good and a bad thing… it means that they can’t borrow money at a high interest rate to use in place of an emergency fund in these situations. Probably overall a good thing for this specific family.
How often do you use (or wish you could use) your emergency fund to temporarily fund things while you’re waiting for a reimbursement or for someone to fix up a snafu? Any good stories?