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I have two emergency funds. here’s why

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  • As a Latina, I grew up with strong family and community values.
  • A family emergency fund will help me support my parents without sabotaging my own finances
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If you’ve ever searched for personal finance advice online, you’ve probably seen the headline, “You Need a emergency fund. “

And I totally agree with you.

After researching the term “family emergency fund” and finding himself empty-handed, Jannese Torres-Rodriguez decided to seek funding for a family emergency fund.

But for many people, especially those in communities of color, a single emergency fund may not be enough. If you’re like me, or one of the many moms I’ve spoken to lately, you also want some funds to help support your extended family members.

a emergency fund is a pool of liquid savings that you can access if you have a sudden expense or loss of income, and it’s a fundamental part of any holistic financial wellness plan. As we experienced in 2020, life has a way of throwing curved balls that we can’t even begin to anticipate. Even if the pandemic hasn’t directly affected your finances, you probably know someone who was touched. Perhaps a member of your family has been put on leave or had to leave their workplace due to the challenges of virtual schooling.

I experienced this in my own family and immediately wanted to help. I had my own emergency fund and my first instinct was to withdraw money to help my family. But what if I emptied my emergency fund to help my family, and then I couldn’t handle my own emergencies?

I wanted a way to structure family financial aid within my budget, so I reached out to Anna N’Jie Konte, a certified financial planner and founder of Dare to Dream Planning. She suggested creating a family emergency fund. It was the first time I had heard of the concept. I was delighted, but baffled that this concept wasn’t something more commonly talked about. In fact, I tried to Google the term “family emergency fund” and came back empty-handed.

So what is a family emergency fund and should you have one?

What is a family emergency fund?

Certified financial planner Anna N’Jie Konte suggests segmenting the funds into a high-yield savings account for short-term needs, or a brokerage account for longer-term assistance in a decade or more.

A family emergency fund is an account separate from your own personal emergency fund. The purpose of a family emergency fund is to be able to provide financial assistance to extended family members without sabotaging your own financial goals. This can take the form of a completely separate bank account, or a sinking fund in your own savings account. The important distinction is that a family emergency fund is a reserve of money that you set aside for the purpose of helping your family when they encounter financial difficulties, such as a medical emergency, layoff, or reduced income.

While most experts recommend keeping six to eight months of living expenses in your personal emergency fund, how much money you keep in your family emergency fund is up to you.

Community support is common in many communities of color

For Rita-Soledad Fernández Paulino, who goes through @wealthparatodos on Instagram, financially supporting his family and his community is “very normal”.

Rita-Soledad Fernández Paulino has what she calls her husband the “Loved Emergency Fund” and keeps a minimum of $ 2,000 in funds at all times.

Now a mother of two, Fernández Paulino started helping her family with bills and expenses as soon as she started working. She and her husband have created what they call the “Loved One Emergency Fund” to help all family members in need of financial support.

“We keep a minimum of $ 2,000 funded at all times,” says Fernández Paulino. “We funded it at $ 200 at a time and also used the stimulus check to fund it entirely. When we give to our loved ones from this fund, we make sure to contribute again. “

The asymmetric burden of support

Providing financial support to family members places a greater burden on households of color, so planning can ease the stress. According to a Pew Research Study61% of black households and 76% of Latino households who donated money in the past 12 months reported it as a burden, compared to 57% of white households. There are many factors that explain why providing financial support is such a burden on communities of color. Long-standing wage disparities exacerbate the burden of financially supporting extended family members. This is especially true for women of color. So while a family emergency fund would likely be useful for many families, it is especially important for POC communities to take it into account.

Managing the emotions of money

Shang Saavedra suggests reframing the ability to help one’s family as something to be thankful for. She does not set a cap on the financial support she and her husband can provide.

“You need to grant yourself grace if you’re trying to balance your own financial goals with supporting your family,” says Shang Saavedra, founder of the personal finance blog Save My Cents.

“What frustrates a lot of people is that you see other people who don’t have that expectation, and it can make you feel like you’re late,” says Saavedra. She suggests reframing the ability to provide support as something to be thankful for. Saavedra and her husband do not put a cap on the amount of help they can provide. They simply aim to maintain a large reserve for family emergencies. “For us, it’s just what you do for the family. We don’t limit the love we give to someone, nor do we limit the money we are willing to give.

Yanely Espinal says that starting the conversation with your close family members can be the hardest part. Take a crowdsourcing approach and involve other members of your family.

All of the women I have spoken to agree that it is important to give yourself and your family grace. “I think of all the privileges that I had that my parents didn’t have and that impacted their ability to create wealth,” says Fernández Paulino. Lack of education, financial literacy, access to stable income and wealth building tools are just a few of the reasons your loved ones don’t have the financial cushion they might need, so recognizing these barriers is key to alleviating frustration.

Starting the conversation can be the hardest part, says personal finance YouTuber Yanely Espinal, who calls herself Miss Be Helpful. “It’s so taboo to talk to your parents about taking care of them. It’s just unspoken that you’re supposed to understand it, ”says Espinal. The stress around these difficult conversations can be eased by referring to the stories of others in order to initiate the conversation, says Espinal.

Options to financially support the family

N’Jie Konte recommends first assessing whether the required support is immediate or long-term. Here are some questions to ask yourself:

  • Are my parents still working?
  • Are their incomes stable?
  • Are they in good health?
  • How far is retirement?
  • What assets do they currently have?

After performing an initial assessment, Konte recommends “deciding how much support and to whom”. Make a list of who you are willing to provide financial assistance to and under what circumstances. Decide if there are specific expenses that you’d prefer to commit to taking responsibility for, or if you’re more comfortable committing to a specific dollar amount per month.

N’Jie Konte recommends segmenting funds into a high yield savings account for short-term needs. For longer term support that is a decade or more, N’Jie Konte recommends opening a brokerage account on your behalf and by investing the funds. This allows the money to grow with the power of the stock market, and directing the funds to family helps separate it from your other assets.

Espinal recommends taking a crowd-sourcing approach, especially if you have siblings or a larger family. She was prompted to organize this effort after losing her grandfather prematurely due to a medical error he suffered while caring for at a nursing home, and she realized that her own father did not was not prepared to shoulder the final expenses of a funeral. This prompted Espinal to discuss with his siblings how they can avoid ending up in a similar scenario in the future. As one of 9 children, she recruited her siblings to pool funds in a high yield savings account that they set aside to help their parents in retirement.

Saavedra recommends thinking about unconventional ways to provide support. She used frequent flyer mile transfers and credit card rewards to give gift cards to family members. “At the end of the day, for me, it’s all about money. This is all that allows me to help myself meet the needs of others, ”says Saavedra.

Final result

Helping the family financially is a common practice in many communities of color. As a Latina, I grew up with strong family and community values, which are cornerstones of Latino culture and other communities of color. This manifests itself for many of us as a strong desire to provide financial support to extended family, in the United States and abroad. Consider if a family emergency fund can help keep you on track with your financial goals, while helping those who matter most.

This story has been edited and revised. Its original version contained portions that did not meet our editorial standards.

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