Should Kids Have Emergency Funds? Mine Do!

My oldest son was saving money to buy a video game system.  My oldest daughter was saving money to buy some shoes.  They were getting close to the amount needed.  I knew it was time!

The lesson

I heard a financial literacy speaker some time ago explain what he does with his children.  (Shout out to Adam Carroll!)  He said he has an emergency fund for his kids.  They have to keep some specific amount in their savings that they can’t spend.  Now, he made it perfectly clear that they will never have to use it.  That is the job of Mom and Dad to provide for basic needs.  But then he said something that made so much sense to me.  “If they have an emergency fund at age 11, how likely is it that they will have an emergency fund at age 30?”  Good point!

So, to my children’s chagrin.  I explained to my oldest son (age 10 at the time) that he will have a $30 emergency fund that he will not be able to spend from his savings.  My daughter’s (age 8) was $20.  My other son’s (age 5) was $5.  These amounts will go up each year as they get older... they were not that happy!  

But then I explained that when I work with families as a financial planner, many of them don’t have much in the bank set aside.  And when an unexpected thing happens, they have to use credit cards or other resources to deal with the issue.  I think they got the point.  They still weren’t happy, especially now that they were that much further from reaching their goal.  But, I am hopeful that this lesson at ages 10 and 8 years old combined with the continued practice as long as they are in our home will stick with them and throughout their adult lives, they will have sufficient emergency savings.

Joyful moment

It made me smile when our kids first explained to their grandparents why they couldn’t spend all of their money.  You know as a teacher that the student understands the lesson when they can explain it to somebody else.  They did a great job and proved they understood the reason why I am having them do this.

Then, my son in Kindergarten lost a book that he checked out from the school library.  When asked about it from the librarian, he apparently said with a big grin, “Good thing for emergency funds!”  

If they have an emergency fund at age 5, they will have an emergency fund at age 30!

What about you?

Do you have enough emergency savings?  The rule of thumb is 3-6 months worth of monthly expenses set aside for emergencies.  If you don’t, how much can you save each month to begin to build it up?  

This is just one thing we do as a family to teach our children about money and good money habits.  I would be interested in hearing of any things that you do or have done with your children to help them understand good money habits or lessons.  If you have good examples, please email me at and let me know what you do.  If I get enough responses, maybe I can compile the list for a future blog post.

Here are some additional resources about emergency funds:

Emergency Funds: An Ultimate Guide

A Quick Guide to Your Emergency Fund

Emergency Fund: What is it and Where to Keep it?



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