Who Needs an Emergency Fund?

The obvious answer is that we all do. Life is full of unexpected events. Are you ready for them?

  • Your car breaks down and requires a major repair.

  • You fall and break your arm, and are unable to provide child care for four to six weeks. 

  • Your roof springs a leak and your homeowners insurance has a $1,000 deductible. 

  • Your mother becomes ill, and you leave town to stay with her until she recovers. 

  • The largest employer in your town shuts down, and three families tell you they are leaving.

If you think about it, unexpected events are such a fact of life that we really should call them expected events.

Since you are almost guaranteed to encounter a major financial disruption at some time in the next few years, you should plan ahead by setting aside at least three months of living expenses in an emergency fund. 

Deposit this money in a money market fund or bank account where it can be easily accessed and has little or no risk of losing its value. 

Here's what three family child care providers said about this topic: 


  1. "After five years of struggling, the best think I did was to put six months' worth of living expenses into a savings account. This completely changed the way I did business, because I didn't have to worry about the money factor when making business decisions about terminating or enrolling new children." 

  2. "I think it's important for child care providers to have a plan B - a backup plan. Plan for bad weather, power outages, becoming ill and not being able to work, and car breakdowns and repairs. Think of everything you can that could affect your income, and develop a backup plan that will help offset the loss of income in those situations." 

  3. "Make sure you have a three-month emergency fund before you spend any money on more supplies - and I actually feel you need more than three months. My goal is to have a six-to-eight-month backup fund. Because we have those reserves, if a family doesn't work out, I can feel okay letting them go." 

Saving money for an emergency fund may not sound like an exciting project, but it’s an important financial goal you should take seriously. Don’t let the prospect of setting aside three months of living expenses intimidate you. 

The first step is to set a specific goal ($5,000, $10,000, whatever three months of living expenses are for your family). Don’t worry if this number seems impossibly high. 

Second, establish a place where you are going to put the money and commit yourself to not spending this on anything except an emergency. It can be a separate savings account or a money market fund. Don’t put it into a Certificate of Deposit (CD), because there is usually a penalty for taking it out early. 

Third, make regular (monthly) contributions to your emergency fund. Start small: $25 a month is fine. Maintain the discipline of a monthly contribution. To start with, establishing the habit of a consistent contribution is more important than the amount of the contribution. Review your progress at the end of each year and make plans for how much you will save each month next year. 

Don't be discouraged if your progress is slow. Slow but steady wins the race. As your emergency fund grows, so will your financial confidence. You will start to feel a sense of freedom and relief that will make all your hard work worthwhile! 

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Tom Copeland

I've been the nation's leading trainer, author, and advocate on the business of family child care since 1981. I'm a licensed attorney and have presented hundreds of business workshops for family child care providers across the country. I answer thousands of calls and emails each year to help providers, tax professionals and trainers understand complex business and tax issues. Call me at 651-280-5991. Email me at tomcopeland@live.com. Visit me on Facebook. From 1981 to 2009 I worked at Resources for Child Caring in Minnesota (now called Think Small), where I was director of Redleaf National Institute for 15 years. I've written nine books on the business of family child care published by Redleaf Press, a division of Resources for Child Caring. I was on the board of directors of First Children's Finance, a non-profit organization providing low interest loans and consulting and technical assistance to help family child care providers suceed as a business. They operate in Minnesota, Iowa, Michigan, North and South Dakota, Kansas, Missouri, and Texas. Here are some YouTube videos of me talking about my work with this organization and the business of family child care. I graduated from Macalester College (BA) in 1972 and from William Mitchell College of Law (JD) in 1980. I live in St. Paul, Minnesota with my wife Diane and two cats, Duke and Ella.