Savings: A Rainy Day Fund

Saving for a Rainy Day

When it rains it pours… but who cares, if you have an umbrella?

It’s never too soon to introduce young children to the idea of a rainy day fund.  While we don’t want to scare kids with more tales of pandemics and job loss, we can easily teach them that a rainy day fund is an “umbrella” to protect them during a financial storm.  

A simple story can start the conversation with your child

“Imagine Sam sold delicious, fruity popsicles at a popsicle stand on the beach each summer.  Every day, when the sun is hot and blazing, he sells 100 popsicles to happy customers.  With his daily earnings, (let’s imagine it’s $100), he pays for his food, clothing and housing.  He also purchases the supplies he needs to make more popsicles to sell.  After these expenses, there is very little money remaining.  He usually spends his last few dollars playing video games at the boardwalk arcade.”

Sounds like a happy life, right?  But wait...

“One day a big storm hits and Sam is forced to close his popsicle stand since no one is visiting the beach in the pouring rain.  Without his daily $100 profit, Sam doesn't have enough money to buy his dinner, put money towards his rent or purchase the needed supplies for his popsicle business.”

What does Sam need?! 

Why, a rainy day fund, of course!

Prepare for the unexpected

We never know what’s going to happen in this crazy world we live in.  We have to learn to expect the unexpected.  The best way to arm ourselves against future trouble is to be prepared.  Whether it’s a job loss, injury/illness, natural disaster or pandemic, we must be ready for any “rainy day” that awaits us.

This brings us back to Sam and his popsicle stand.  If he could save just five dollars each day towards a rainy day fund, in a few short weeks, Sam would be stocked with enough cash to keep himself afloat, no matter what the weather.  

The takeaway for our kids

We start rainy day funds to cover our needs, not to fund the latest LOL Doll or PS4 game purchase (see our post on needs vs. wants).  If some hardship awaits us, we don’t want it to be compounded by serious financial stress.  The sooner kids recognize the concept of a rainy day fund and appreciate its importance, the better.  

Does your family have a rainy day fund? If so, good on you.  Want to make it really count? Bring your kids into the conversation.  By letting them know how you are preparing for the unexpected, you are not only modeling responsible financial behavior, but also giving them a sense of security in an unpredictable world.

Want more on savings? Check out our guides to help you teach your child about saving money.