Financial emergencies can be just as bad as a car crash. Learn how to avoid a financial crash with budgeting and saving
We wear seat belts to protect us from life-changing car crashes but how many people are protected from a financial crash? One of the best money lessons you can teach your kids is how to budget and save an emergency fund.
Today’s essay is by Jessica Wilkinson, a student at Utah State University in Mathematics. She uses a tragic experience to understand the need to avoid financial emergencies.
Check out Jessica’s story and please share on social media. The most-shared essay on how parents can teach their kids about money will win our $500 personal finance scholarship, announced August 31st!
Driving and Financial Emergencies are a Lot Alike
It was a busy, sunny spring day, and I had just gotten off work. Grabbing the enormous pile of tax letters to be mailed, I jumped into my car, plopped the huge pile in the seat next to me, and headed off to the post office. A few minutes later I was almost to my destination; just one more left turn and I would be there.
I paused at the four way stop, and then quickly went. Fearing the speed of my turn might send the numerous letters flying, I glanced down at them. That was my biggest mistake. By the time I looked back up, even though mere milliseconds had passed, it was too late. The last thing I remember seeing was a flash of red before the world abruptly became a deafening crash of metal on metal, shattering glass, burning-hot airbags, and thick, black smoke.
Four years have passed since that car crash, but it remains a picture perfect in my memory. In fact, to this day I still take a ridiculously long time to make a left turn, going only when I know I won't end up in another car crash. I have certainly learned my lesson; I only wish it wouldn’t have been in such a hard way!
Part of avoiding a financial crash means finding new ways to make money in case you run into trouble. Check out this Work from Home Directory of the best home-based businesses.
How to Avoid a Financial Crash
What does this have to do with personal finance? Everything! Money, like a car, can take us to incredible places impossible to reach on our own. However, there is a catch. Both of these invaluable tools involve risk, and if we make the wrong move with either of these, we, as well as others, can get seriously hurt. That doesn’t mean that we shouldn’t use them, but that we merely need to do so wisely.
Financial emergencies can wipe you out just as badly as a crash. Check out these five financial emergencies and how to cope.
I must have done something good in heaven, because I was blessed with wonderful parents who taught me all about how to wisely use money. At a young age I was taught that if I wanted something, I would need to use my own money to get it. Consequently, chores were made available and a wage established for each chore. This taught me quickly the value of the money I made, and to not spend it without thinking twice.
At 10 years of age I got a paper route. Suddenly I found myself rolling in the dough! Or at least $100 a month certainly felt like a lot of money. My mom sat down with me and showed me how to make a budget using the magic of Excel. She painstakingly taught me how to keep track of my income, give 10% to the Lord, plan for my spending, and how to save a little, too. Because of her and my father’s careful teachings I was able to save up a little for college, pay for a flute, and also have a little fun!
Cellphones became all the rage when I turned 15 years old, and I wanted “in” on the bandwagon. However, like before, if I wanted something I had to pay for it myself. As I explained my new desire to my parents, they in turn taught me about monthly bills, and explained the financial expectation that would come if I decided to get a cell phone.
Once understood, I bought a cell phone. I met my monthly bill with my parents, and learned a lot about what it meant to enter a contract and have something to pay every month.
Don’t let inflation chip away at your emergency fund. Learn how to invest your emergency fund for safety and return.
Passing Down Good Money Lessons to My Kids
These little nuggets of financial wisdom given to me by my parents have set a wonderful precedence. To this day my husband and I keep a budget, and work hard to ensure we pay our bills, save money, and spend wisely. We have high goals, in which we hope to finish school, quickly pay off our loans, and begin to donate to charities and create scholarship funds to help those that come behind us.
I believe it is these financial teachings both my husband and I have received from our parents that act like the laws of the road when driving. They protect us as well as others, allowing us to travel to wonderful destinations, all while avoiding crashes.
When we do come into financial difficulty, I hope we can learn from it and become better by it, like I did with my car crash. In the end, we hope to pass our knowledge on to our future children, so they, too, can have personal financial success.
I want to thank Jessica for her essay on avoiding financial emergencies. Be sure to support Jessica by sharing the article through social media and check in August for the winner of the personal finance scholarship.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.