In today’s world, financial stability is very vital. As teenagers start to change and find themselves in the adult world, the importance of being financially prepared can’t be overstated. The confidence to handle unexpected expenses, solve economic challenges, and have financial independence can even start as an adolescent. In this article, we’ll delve into the significance of an emergency fund for teens and talk about the “why” behind this crucial financial safety net. You will also receive some actionable strategies to kickstart your journey towards a secure and promising financial future.
Understanding the Significance of Emergency Funds
Financial experts emphasize the importance of emergency funds as a fundamental aspect of sound money management. At its core, an emergency fund is a safety net – a financial cushion that can provide you peace of mind and safeguards against unexpected challenges.
If you had an emergency fund in the pandemic, it would’ve helped a lot. Since COVID-19, an April 2021 Forbes survey found that nearly 40% of people who had emergency funds were driven to access them, and 73.3% of those people used up half or more of the fund, while 29% used all of it (investopedia.com).
When the whole country went into lockdown, thousands lost their stream of income, but had to continue to pay their living expenses. Though the government tried to help, it took time and not everyone qualified for the aid. That’s where emergency funds could have stepped in. The latest Bankrate survey on July 21, 2021, found that 51% of Americans have less than “three months” of expenses covered in their emergency funds, including 25% who don’t even have a fund” (Investopedia.com).
So emergency funds are definitely important. They can save you from unforeseen expenses and financial hiccups: medical expenses, car repairs, educational debt. They can even safeguard you for when the entire country goes into lockdown— if you have enough money.
So how do you start one? And how much money is enough?
How To Start an Emergency Fund
According to Morgan Stanley, here’s how to create an emergency fund:
Congratulations! You’ve started your first emergency account and are now on the journey towards financial independence and security. Through the strategic selection of the right account, diligent savings, and prudent usage, this fund will shield you against any curve balls that life might throw your way. Remember that the small steps you take today can lead to peace of mind and financial empowerment tomorrow. So whether your car broke down, you accidentally twisted an ankle, or something uncertain comes up in your life, you can be sure that your well-prepared emergency fund will help you through the challenges that lay ahead.
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