I Have Two Emergency Funds: One for Me, and One for My Parents. Here’s Why.

A photo to accompany a story about having an emergency fund for yur family Courtesy of Jannese Torres-Rodriguez
Jannese Torres-Rodriguez and her mom, Marga Torres. Torres-Rodriguez has two emergency funds — one for her and one for her close family members.
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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 looked up personal finance advice online, you’ve probably seen the headline before: “You need an emergency fund.”

And I absolutely agree that you do.

After researching the term “family emergency fund” and coming up empty handed, Jannese Torres-Rodriguez took it upon herself to research funding a family emergency fund.

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

An emergency fund is a reserve of liquid savings 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 curveballs that we can’t even begin to anticipate. Even if the pandemic didn’t affect your finances directly, you probably know someone who was impacted. Maybe someone in your family was furloughed, or had to leave the workplace due to the challenges of virtual schooling. 

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

I wanted a way to structure family financial assistance into my budget, so I reached out to Anna N’Jie Konte, a certified financial planner and founder of Dare to Dream Planning. She suggested setting up a family emergency fund. It was the first time I’d ever heard of the concept. I was thrilled, yet baffled that this concept isn’t something that’s more commonly spoken about. In fact, I tried Googling the term “family emergency fund” and came up 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 funds in a high-yield saving account for short-term needs, or a brokerage account for longer-term support that is a decade or further out.

A family emergency fund is a separate account 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 be in the form of a completely separate bank account, or a sinking fund within your own savings account. The important distinction is that a family emergency fund is a pool of money that you earmark for the purpose of helping out your family when they encounter financial hardships — like a medical emergency, layoff or income reduction.

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. 

Communal Support Is Common in Many Communities of Color

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

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

Now a mother of two, Fernández Paulino began 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 any family members in need of financial support.

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

The Skewed Burden of Support

Providing financial support to family members places a greater burden on households of color, so planning for it may alleviate the stress. According to a Pew Research study, 61% of Black households and 76% of Latino households who gave money in the past 12 months reported it as a burden, compared to 57% of white households. Many factors play into why providing financial support represents a large burden to 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 come in handy for many families, they’re especially important for POC communities to consider.

Dealing With the Emotions of Money

Shang Saavedra suggests reframing the ability to help your family as something to be grateful for. She doesn’t set a cap on how much financial support she and her husband can provide.

“You have to give yourself grace if you’re trying to balance your own financial goals and support for 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 you’re behind,” says Saavedra. She suggests reframing the ability to provide support as a thing to be grateful for. Saavedra and her husband don’t set a cap on the amount of support they can provide. They simply aim to maintain a large reserve for family emergencies. “For us, it’s just what you do for family. We don’t limit the love we give to someone, so similarly, we don’t limit the money we are willing to give.” 

Yanely Espinal says starting the conversation with your close family members may be the hardest part. Take a crowd-sourcing approach and get other members of your family involved.

All of the women I spoke to agree that giving yourself and your family grace is important. “I think about all the privileges I had that my parents didn’t have that impacted their ability to build wealth,” says Fernández Paulino. Lack of education, financial literacy, access to stable income and wealth-building tools are just some of the reasons why your loved ones don’t have the financial cushion they may need, so acknowledging those barriers are critical to easing the frustration. 

Starting  the conversation may be the hardest part, says personal finance YouTuber Yanely Espinal, who goes by Miss Be Helpful. “It is such a taboo to talk to your parents about taking care of them. It’s just unspoken that you’re just expected to figure it out,” says Espinal. The stress around these difficult conversations can be made easier by referencing the stories of others in order to introduce the conversation, Espinal says.

Options for Financially Supporting Family

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

  • Are my parents still working?
  • Is their income stable?
  • Are they healthy?
  • How far away is retirement?
  • What assets do they currently have?

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

N’Jie Konte recommends segmenting funds in a high-yield saving account for short-term needs. For longer-term support that is a decade or further out, N’Jie Konte recommends opening a brokerage account in your own name and investing the funds. This allows the money to grow with the power of the stock market, and having the funds earmarked for family helps keep it separate 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 mistake he experienced during his care at a nursing home, and she realized that her own father was not prepared to handle final expenses of a funeral. This prompted Espinal to have a discussion with her siblings about how they can avoid finding themselves 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 earmarked to help support their parents in retirement. 

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

Bottom Line

Helping 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 for many of us as a strong desire to provide financial support to extended family, both in the U.S. and abroad. Consider if a family emergency fund can help you stay on track with your financial goals,— while helping those that matter most.

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