Teaching the Whys and Hows of Emergency Funds

Teaching the Whys and Hows of Emergency Funds

Emergency savings

We need to normalize conversations about money. Oddly, we feel very comfortable talking about spending it, but not how we make it and hold onto it.

One place to dive in is by exploring the benefits of an emergency savings account.  Everyone experiences emergencies, typically about once a year or so. Yet many of us continue to be surprised when emergencies crop up. They’re not so much “emergencies” as “predictabilities”.

Any emergency is a lot less painful if it isn’t made worse by unnecessary financial stress. If the money is sitting there waiting for an emergency, you know where the money will come from, and you can focus on the blown tire or the broken leg, not the finances.

Moreover, since unplanned-for emergencies are the number one cause of snowballing debt, an emergency fund can prevent some very serious life consequences.

Some folks are forced to resort to high-interest credit cards; some might go to a predatory lender like a check-cashing agency.  Something as simple as a blown tire could even lead to loss of a job if a person can’t find the money to fix it.

How to do it? How to teach it?

The first step is helping people understand the power and leverage that an emergency savings account will provide.

Students can build vocabulary and comfort by reflecting on real (or imaginary!) times when having an emergency savings account would have made all the difference.

Everyone has had tough times. I often use a (real) incident when I couldn’t get back to my home in a nearby city after a friend didn’t show up, because I didn’t have $11 in my bank account for a bus ticket. Such discussions require some vulnerability, which can help to reduce the shame that many people have about their finances.

If anyone does use shaming language, be prepared to gently redirect; often these shaming impulses are attempts to counter their own sense of shame or fear.

Try to create some parameters to avoid a full-on confessional atmosphere that might result in later embarrassment or regret. A financial literacy component could follow, say, a segment on transportation. That way, people could be guided to tell transportation-related stories, rather than stories of jailed family members or medical bills.

This is also a good time to mention that many community organizations have trained financial coaches, so if things surface that could use the attention of an expert, there is help beyond the classroom. Have a few organization names and contact numbers at your fingertips, such as CLUES, Build Wealth MN, Lutheran Social Services, or the International Institute of Minnesota.

Setting goals

Once students have developed some reflection on past emergencies, a teacher could turn the lesson to exploring how each “step-up” in emergency savings could benefit students at different stages of their financial journey.

In planning an emergency fund, emphasize that starting small is good. Keeping goals manageable is essential to success.

But an emergency fund also should grow over time as a person’s financial position improves.

Putting different levels of goals on the board can help jump-start that conversation. So $500 is better than zero dollars: that damaged tire is no longer an insurmountable problem. A thousand dollars is better than $500, and will alleviate most short-term emergencies.

Students can be then be encouraged to roughly calculate their own ramen-level budget (that is, the minimum amount required for that person’s bare-bones expenses) per month.

Once people start meeting other essential financial goals, an emergency fund should expand to cover three months of “ramen-level” expenses. That should cover most job losses and temporary disabilities.

Ultimately, we would love to see six months of ramen-level expenses, potentially opening up space for big life goals like staying home with a new baby, quitting a hated job, retraining in another industry, or starting a business.

Next steps?

Goals are one thing, actual plans to get there are another. Make sure to emphasize that this is a skill that you build, not a quality some people were born with.

Since students will have varying degrees of experience, this is a good opportunity for peer teaching. One approach is to create a four-corners exercise where you set different savings goals. One corner is trying to save $100 in a month, one corner $500 in three months, another $1000 in a year, and one is presented with the goal of saving $2500 in two years.

The steps they propose should be concrete and based in reality, and ones that students could easily activate. When the groups report back, the teacher can ask the class to evaluate the suggestions, based on their practicality and effectiveness.

Some suggestions to kick-start these discussions or supplement student ideas:

  • See if you are eligible for an IDA — an Individual Development Account — where the government or an organization matches your savings. In Minnesota, here’s a good place to start: Minnesota Valley Action Council IDAs
  • Round-up apps like Acorns or Chime.
  • Pay yourself first, ideally through direct deposit.
  • Pay yourself a tip every time you pass up a “sin,” or every time you indulge one! Qapital is great app for that.
  • Direct any “found” money straight into the emergency savings fund.
  • Learn to use financial tracking software like Mint or Every Dollar.
  • Sell your stuff! Make money and eliminate clutter!
  • Start a side-hustle. Generate some ideas around this as a class. Cat sit! Shovel walks! Deliver papers! Organize messy spaces! Hem pants! Create websites! Translate languages online! We’re not (necessarily) trying to replace regular employment income, but to establish that all-important emergency fund.


We all need help getting better at being in charge of our money, instead of our money being in charge of us. Bringing financial literacy tools into the ABE classroom benefits all of us. Even people who are doing well financially can benefit from thinking about their strategies anew.

Helen Delfeld, Financial/Homeownership Counselor International Institute of Minnesota