Credit Union Youth Month: Saving for Emergencies

Teaching your child the power of saving money starts with helping them develop valuable habits that can last the rest of their lives. In recognition of Credit Union Youth Month this April, we’ll be giving tips and strategies for how to help your child maximize their savings potential. To get started, let’s talk about how and why to save for emergencies.

Saving for Emergencies

Anything can happen in life, and you never know when you’ll have to rely on your savings to get by. Of course, that’s only possible if you already have savings built up. Whether your child is six years old or 16 years old, it’s never too late to talk with them about being smart with money. Take some time now to teach them the importance of regularly setting money aside for emergencies.

A good rule of thumb for people of all ages is to save enough money to last at least six months. The older you are and the more expenses you have, the larger your six-month savings will need to be. Keep in mind that “expenses” includes both needs and wants. Even if you're focused on being as frugal as possible, most people aren't able to go too long without spending money on wants, like entertainment or treats. This is normal. Rather than ignore it, factor it into your savings plan instead. Also remember that the amount of your monthly expenses may change from time to time, so it's a good idea to check on your emergency savings every so often to make sure you have enough.

Depending on the age of your child, they may have very few (if any) expenses that they’re responsible for on their own. But that won’t last forever. Help them to start saving now so that they can have more for themselves in the future.

The 10% Rule

One popular way of building up savings is the “10% rule.” According to this rule, the first thing you should do after getting paid is set aside at least 10% of your income for savings. That’s one dollar for every 10 earned. The rest can be used to save for miscellaneous items or to spend on yourself. By getting your child used to the 10% rule now, they can turn it into a lifelong habit.