4 questions to ask before dipping into your emergency fund

By Ceyda Erem ·

As the nation continues to keep up with the latest COVID-19 updates, rules and regulations, one area under the spotlight is how Aussies will cope financially during the pandemic. 

According to recently released figures from the Bankwest Curtin Economic Centre, by November, more than one million Australians are likely to lose their jobs due to the economic blow brought on by the coronavirus, prompting many households to access their emergency savings. 

But while it might make sense to drain your emergency fund to stay afloat, we’ve got five questions to ask yourself before you hit the panic button on your finances.

Are there any benefits I can apply to? 

If you haven't been keeping up with the news you may have missed the announcements of various stimulus packages that are being provided by the Federal Government to help vulnerable Aussies get through this difficult time. 

For instance, if you receive JobSeeker payments or are a sole trader or casual worker earning less than $1,075 a fortnight, you may be eligible for a $550 supplement every fortnight for the next six months. 

Or if you receive any Centrelink benefits, like a carers allowance, you are entitled to a one-off $750 stimulus payment. Just keep in mind that this payment won’t be rolled out until July 13 2020. 

And if you own a small business, you may be able to access the stimulus package as well. If your small business has a turnover of less than $50 million, you will receive a tax-free cash payment of up to $100,000 to keep your business running and maintain staff. Organisations with less than 20 employees will receive up to $7,000 each quarter for every currently employed apprentice to help pay their wages for up to nine months. 

What payments can I pause or freeze? 

While you might not be able to pump the breaks on certain expenses, like your groceries, you do have the ability to pause or defer larger payments, such as your mortgage or energy bill

Within the last week, the big four banks and smaller lenders have come forward and announced that mortgage holders can pause their home loan repayments for up to six months. Other forms of support include decreasing variable rates, allowing access to redraw funds through offset accounts and waiving fees. Get in contact with your bank to see what options are available for you. 

Utility payments, such as your energy bill can also be extended or repaid in flexible installments. While you can’t freeze your payments, you can speak to your energy provider about being put on a financial hardship plan that allows you to make your payments on an agreed schedule. 

Small businesses are again not exempt from these support packages, as small business owners can speak to their bank about having their business loan or credit card repayments deferred and accessing their term deposits early without facing a penalty. 

What spending can I put off?

With gyms, recreational centres and bars being shut down, more Aussies may be finding it harder to keep themselves entertained. And since there’s not much you can’t buy online, it’s not uncommon for Aussies to pass the time with a bit of online shopping. However, if you are in a position where you don’t have a guaranteed income, frivolous spending may not be ideal. 

Keep yourself from overspending online by putting purchases on hold for 24 hours. This way you’ll be able to make sure it’s an item you really need. Another way to minimise costs if you are trying to uphold your regular gym routine is to skip purchasing equipment and use items around your house, like filling backpacks with books or heading to Youtube for workout inspiration. 

And while it’s almost become the norm to overbuy items to stock up for a potential lockdown, reckless spending like this could see you go over your budget. Keep spending to a minimum by only purchasing items you realistically need. 

Will I be able to replenish my savings later on?

If you are considering using money in your savings, this is an important question to ask. According to Mozo research, it takes the average person 9 months to build an emergency stash, and that’s assuming you’re saving 20% of your monthly income. 

While it’s unclear as to how long the nation is expected to maintain this lifestyle, only take the amount you need and can afford to put back later on. 

Need a better place to store your savings during this time? Head on over to our savings account comparison tool.

Compare savings accounts - page last updated October 17, 2020

Search promoted savings accounts below or do a full Mozo database search. Advertiser disclosure.

  • mozo-experts-choice-2020

    1.50% p.a. (for $0 to $250,000)

    0.15% p.a.(for $0 and over)

    Yesup to $250,000

    Bonus rate when at least $20 is deposited each month and five Visa Debit transactions are made each month using linked Everyday or Glide transaction accounts.

      Compare
    Details
  • 1.15% p.a. (for $0 to $250,000)

    0.01% p.a.(for $0 to $5,000,000)

    Yesup to $250,000

    Minimum deposit of $200 and no withdrawals in the month.

      Compare
    Details
  • Hot DealUse code MOZO5 for $5 bonus when you sign up!

    1.60% p.a. (for $0 to $50,000)

    0.10% p.a.(for $0 and over)

    Yesup to $250,000

    Make 5 or more successful card purchases per calendar month using your Up debit card and digital wallets (ATM transactions excluded).

      Compare
    Details
  • 1.55% p.a. (for $0 to $500,000)

    0.35% p.a.(for $0 and over)

    Yesup to $250,000

    Bonus rate for the first 4 months from account opening

      Compare
    Details

^See information about the Mozo Experts Choice Savings Accounts Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

Ceyda Erem
Ceyda Erem
Money writer

Ceyda Erem is Mozo’s authority on Energy, as well as having broader expertise as a personal finance writer. She loves to put her researching and writing talents into stories that help our readers to make more informed financial choices, whether that’s about finding the best energy deal or writing about the latest sneaky bank tricks. Ceyda has a Bachelor of Arts (major in writing) from Macquarie University.