“I’ve been saving up for months!” Meghan was telling her friend Jessica as they toweled off after enjoying a swim at the community pool. “And now I finally almost have enough to buy a phone-photo printer dock. Just a few more weeks!”
“Have you really been putting away all of your allowance?” Jessica asked.
“Not all of it,” Meghan said. “I keep a little bit for stuff like pizza and ice cream, but the rest of it goes straight into a special jar on my desk—and my pile of money is growing bigger every week!”
When the girls started walking home together, Meghan turned toward Jessica.
“Hey—do you want to come over and practice our foul kicks until dinner time?”
“Sounds good,” Jessica agreed quickly. “Let me just OK it with my mom.” She pulled out her phone and sent a quick text message. Less than a minute later, she gave Meghan a thumbs-up sign and soon the two girls were kicking a soccer ball around Meghan’s front yard.
“Come on, give it some power!” Jessica shouted, mimicking the girls’ soccer coach. “Let’s get that goal!”
Meghan grinned. “I’ll give you some power!”
She drew back her foot and gave the ball a gigantic kick. It soared way, way, way up high. And then to the girls’ shared dismay, it crashed straight through Meghan’s neighbor’s second-floor window.
“Mrs. Sontanio says it’s going to cost her $250 to get that window repaired,” Meghan’s dad told her later after hanging up the phone.
Meghan’s stomach tumbled toward her toes. So much money for a window? she thought.
“That’s what it cost,” dad said, crossing his arms and leaning against the counter. “Now, how are we going to come up with that kind of money, Meghan?”
Meghan looked down at the floor and kicked a table leg. She knew what her dad was thinking. She knew what he wanted her to say, but she didn’t want to say it.
Dad waited. Soon, Meghan had no choice.
“I guess I’ll have to pay for it,” she said. “From my savings.”
Dad crossed the room and sat down across from Meghan.
“I know you’ve been saving up for a photo printer for a long time now,” he said. “It’s upsetting to have to take almost all of that money and use it for something you never thought would happen.”
Meghan just shrugged.
“Maybe we can work something out, like an advance on your allowance,” Dad said thoughtfully. “Or maybe mom and I would pay for some of the broken window.”
Meghan brightened. “Really, Dad?”
“Maybe,” Dad said. “We’ll see.”
He sat down across from Meghan, his face serious. Meghan knew that look. It was Dad’s I’m-about-to-lecture-you look. Was she going to get a half-hour talking-to now on how she should be more careful when she played ball?
“I want to talk to you about something you could do that would help you out when things like this happen,” Dad said
Meghan was curious. This didn’t sound like a lecture. “What’s that?” she asked.
Dad leaned forward. “You know that Mom and I try to budget and plan for all of our expenses, right?” he asked. “We budget for paying the mortgage and for your soccer lessons and groceries and stuff. We also have a special savings account where we put away money for special things like vacations and holiday gifts, just like the money you have in that jar on your desk that you’ve been saving up for a photo printer.
“But sometimes,” Dad continued, “something like a broken window happens—and we need to come up with a lot of money with very little warning, just like you need to.”
“So what do you do?” Meghan asked. “Do you take that money out of your savings account?”
“Nope,” Dad said, shaking his head. “We have something called an emergency fund. We keep a small sum of money in a special place and we separate it from our regular savings. This way, when we have an emergency, we take the money from this fund instead of using up our regular money or our savings.”
Meghan listened carefully. This sounded like a good idea!
“What kind of emergencies do you and Mom have?” she asked. “You’re not breaking any windows!”
“That’s true,” Dad smiled. “Remember last month when the oven broke and we needed to buy a new one? How do you think we paid for that?”
“The emergency fund!” Meghan said. “I wish I had one, too.”
“It’s never too late to set one up,” Dad said. “Why don’t we get out some paper and pencils and work out a way for you to start building one now so that the next time you have an emergency, you won’t have to take money out of your savings?”
And that’s exactly what they did.
- Can you name three surprise expenses you might use an emergency fund for?
- Do you think Meghan’s parents should have offered to pay the full cost of the broken window? Why, or why not?
- Why is it important to separate your regular savings and your emergency fund?