You’re reading these words, so you may already understand the importance of having an emergency fund. But if you’re in the sandwich generation—meaning you need to look after your aging parents and your own kids—you need to ask yourself whether the most important people in your life know and understand the importance of emergency funds, too.
A 2018 report revealed that 40 percent of Americans are unable to cover a $400 emergency expense. Similarly, another study found that just 40 percent of Americans can cover an unexpected $1,000 expense.
You likely don’t want your loved ones to find themselves in a pinch when something unpredictable happens. By encouraging them to create their own emergency funds, you may be able to help your parents and kids get in a position to absorb these unforeseen costs—and get the peace of mind that comes with being able to do so.
What Is an Emergency Fund?
An emergency fund—you guessed it—is a stockpile of money set aside for a rainy day.
If you lose your job, incur unbudgeted medical expenses, have car troubles, or need to make unexpected home repairs, an emergency fund is standing by, ready to help. Despite the benefits that come with emergency funds, 40 percent of Americans don’t have enough cash to cover a $400 emergency, according to a 2018 Federal Reserve survey.
Why Your Parents and Kids Need an Emergency Fund
There are many reasons your parents and kids can benefit from having their own emergency funds.
For starters, you probably don’t want both your parents and your kids turning to you when unexpected bills pop up. An emergency fund is the foundation that may help in your parents and kids aren’t financially dependent on you. At the same time, it gives them the calming feeling that comes with knowing they can cover expenses that might pop up at any time.
Further, emergency funds may help that your parents and kids can pay their bills in the event that they lose their jobs or are otherwise out of work (e.g., a seasonal contractor). It might also help them cover unplanned expenses—such as when the car unexpectedly breaks down.
On the flip side, an emergency fund can also be used to buy their favorite things. For example, maybe your kid wants to buy a new computer game that came out. They could tap into their emergency fund to do so—and then replenish it at their earliest convenience.
As an added bonus, because you’re not always going to be handing out money, an emergency fund may help you feel more financially secure and comfortable.
How to Get Started with Building an Emergency Fund
At this point, you’re probably sold on the idea of making sure your parents and kids have their own emergency funds to tap into as needed. But you might be wondering how, specifically, said funds can be created.
Creating an emergency fund may start with reducing expenses. Maybe your children or parents have a penchant for eating out several times a week, for example. By deciding to eat at home more often, they might be able to save a few hundred bucks each month—and that money can be used to seed their emergency funds.
Your parents and kids may be able to identify additional areas for savings by examining their credit card bills in full each month. For example, although subscriptions to services such as Netflix and Spotify might seem like they’re only a few bucks, those costs can add up significantly. Maybe they’ll find out that they’re still paying for a gym membership even though they haven’t stepped foot inside the facility in years.
Lifestyle changes can also help your parents and kids save money to start an emergency fund. Let’s say your loved ones are keen on paying for an Uber ride every time they go anywhere. Switching to public transportation, in this example, can help them save a substantial amount of money.
Ready to Help Your Parents and Kids Create an Emergency Fund?
Emergency funds may give people of all ages who live all over the world a more comfortable life. But you might already know this because you’ve had an emergency fund of your own for years.
By helping your parents and kids build funds of their own, however, your life might become even more comfortable because you won’t have to worry about being your loved ones’ piggy bank.
The sooner you start teaching your parents and kids about the importance of coming up with a spending plan and sticking to it, the earlier they’ll be able to start creating a comfortable emergency fund.
Truth be told, none of this might happen overnight. But with enough discipline and some encouragement, you can go a long way toward helping your loved ones secure their own financial futures—which may help you do the same.
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