What is Emergency Spending?

As regular readers know, I have appointed myself the Chief Financial Educator for my many nieces and nephews who are scattered across the country. Recently, we’ve been exploring the question, “Why do people spend money?” One of the answers to that question is, “Because someone has an emergency.” But that answer, of course, brings up the question of "What is an emergency?”

Here is how I answered that question for them.

When I was 14, I was starting high school, and my mom gave me my first credit card, a Montgomery Ward card. Montgomery Ward was kind of like Target, only much, much bigger. They sold EVERYTHING (see some old photos below). I didn’t live with my mom at the time, so she told me to use it wisely. “You can use it for emergencies,” she said.

I had the card in my wallet for 4 years and didn’t use it once. 

Why? Because my mom and I had never talked about what constituted “an emergency.” I knew I shouldn’t ever waste money or covet things I didn’t need so despite my power to buy nearly anything, I bought nothing. 

Years later I asked my mom, “Hey, what was your thinking in giving me that card? What in your mind would have constituted ‘an emergency’?” She laughed and thought it made sense to give me the card since I was starting high school and she knew I was using my dad’s old typewriter to learn to type. What if I needed to buy paper, a new ribbon, or liquid correction? Or maybe I would grow and need a new sweater before we saw each other again. She knew I was frugal and wouldn’t use the card unless I needed it. 

QUICK: What does frugal mean?

Side note:

Yes, in the olden days typewriters needed ribbons coated in ink that would fit into a typewriter that periodically needed to be replaced. You could tell when the letters weren’t easy to see on the paper - oh, the ribbon must be running out of ink! If you made a mistake, you had to scroll the paper up by hand, wipe over your mistake with correcting fluid that was like nail polish. Check out the metal teeth in an arch in the typewriter in the photo. Those are the keys. The only power to get the key (one letter each) to snap up and slap the paper was the strength of your finger hitting the key. It was hard to do on a manual typewriter. I remember thinking as a teenager that secretaries must have had iron strong hands to type fast and correctly. When my grandmother, Gloria, applied for jobs in 1943 she had to tell the boss how fast she could type with no errors. If she didn’t know, they’d test her before offering her a job. Gloria was a FAST typist and very proud of that. 

Unfortunately for me, my idea of an emergency was a car wreck, someone losing all their money, or your little brother swallowing coins. None of which Montgomery Ward could help with.

Everyone’s idea of an emergency is different. It depends on your age, what expenses you have, what responsibilities you have, and what funds you have. It depends on someone’s idea of risk, need, and planning. So how should adults define the use of emergency funds for kids? 

Here are the 3 words and one question kids should consider when deciding if they should use their emergency savings:

Is this expense . . .

Urgent?

Unexpected?

Necessary?

And . . .

Can I live easily with the decrease in my savings of this money?

If you can remember to ask yourselves those questions, you’ll know more about emergency spending than I did when I was your age, and that makes you much smarter than me!