Grade: 6 Lesson 11
What financial risks exist when unexpected emergency events happen?
SS.8.FL.6.1 - Analyze the fact that personal financial risk exists when unexpected events can damage health, income, property, wealth, or future opportunities.
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LAFS.6.L.3.4-Determine or clarify the meaning of unknown and multiple-meaning words and phrases based on grade 6 reading and content, choosing flexibly from a range of strategies.
LAFS.6.RI.3.7-Integrate information presented in different media or formats (e.g., visually, quantitatively) as well as in words to develop a coherent understanding of a topic or issue.
LAFS.6.SL.1.1-Engage effectively in a range of collaborative discussions (one-on-one, in groups, and teacher-led) with diverse partners on grade 6 topics, texts, and issues, building on others’ ideas and expressing their own clearly.
SS.8.FL.6.1 -Analyze the fact that personal financial risk exists when unexpected events can damage health, income, property, wealth, or future opportunities.
Emergency Funds
Lesson # 11
Correlated Florida Standards (See Full Text on Cover Page)
LAFS.6.L.3.4
LAFS.6.RI.3.7
LAFS.6.SL.1.1
Essential Questions
- What are the financial risks that exist when unexpected emergency events happen?
- How can you help protect yourself and your money from unexpected emergency events?
Learning Goals/Objectives
- Students will differentiate between regular, ongoing expenses and expenses related to unexpected emergency events.
- Students will recognize the importance of establishing an emergency fund to help offset the costs of unexpected emergency events.
Overview
Students will learn about the need to plan financially for unexpected emergency events and the importance of having a financial "safety net,” an emergency fund.
Materials
- Access to video technology
- Copies of the Student Reading and Activity Sheet entitled, The Emergency Fund. (Included in the lesson.)
Time
50minutes, with time for homework, if needed.
Activity Sequence
INTRODUCTION/HOOK(15minutes)
- Ask students if they have ever heard the phrase: “Saving for a rainy day.” Discuss what the phrase means (i.e., having a fund set aside for unexpected, serious events, including emergencies.)
- Ask students what they believe is meant by “unexpected emergency events.” Have them cite examples.
NOTE:In this lesson, an unexpected emergency event is any event that can have a major negative effect on one’s finances. Examples include: natural disasters like hurricanes, floods, or tornadoes; a family illness; a car accident; or, the loss of a job.Be sure to explain that unexpected events do not include monthly bills or other everyday expenses. They do not include unnecessary luxury purchases either (e.g., purchasing a new car or boat).
- To further illustrate the point that unexpected emergency events can be devastating financially, view the short video clip of Hurricane Andrew which struck South Florida on August 24, 1992. The video may be accessed at: Other videos may also be found by searching the Internet.
ACTIVITY(30minutes)
- Provide students with copies of the Student Reading and Activity Sheet entitled, The Emergency Fund.(Included in the lesson.) Have students complete the reading and discuss the following:
- What is the difference between a financial emergency and purchasing luxury items?
- What is an emergency fund?
- Do most Americans have an emergency fund? Why is this not wise?
- Explain the phrase: “The unexpected is always expected in life!”
- How much money should an emergency fund have? Why is this hard to determine?
- Assign the activity following the reading (i.e., Justin’s Emergency Fund) to student pairs. Prior to beginning the assignment, review the scenario and questions with students so as to clarify their task.
CLOSURE (10 minutes)
- Ask students to share the expenses they reduced to reach Justin’s goal of establishing an emergency fund. Give students the opportunity to explain their choices in reducing his specific expenses.
OPTIONAL EXTENSION SUGGESTION/HOME LEARNING
Have students calculate the following: If Justin’s three-month emergency fund is in an account paying 1.5% interest each year, compounding monthly, what is the balance after one year?
Sources/Bibliographic Information that contributed to this lesson
The Emergency Fund
Introduction At this point in your life, your financial security is mostly the responsibility of your parents or guardians. Still, it is important to begin thinking wisely about your finances. Savings, and maybe investing, should be your financial goals for now. However, it is also important to learn now how to protect yourself from emergencies that may hurt you financially later. Let’s begin by talking more about the importance of an emergency fund in case you experience a “rainy day.”
What Is an Emergency Fund? An emergency fund is a “rainy day fund. “ It is a stash of easily accessible money that has been set aside for emergencies. Having money to deal with unexpected events can give you a sense of security because you’ll know that such an event won’t wreck your budget or spoil your long-term financial plans. Unfortunately, most people don’t have emergency funds. Over 50% of Americans don’t have money set aside for emergencies.
What Is a Financial Emergency? It’s important to understand what a true emergency is and what it is not. Wanting new clothes, a new, faster computer or even a new car is not an emergency. Real emergencies include getting sick or injured, losing your job, or having a major leak in your roof!
Why Is It Important to Have an Emergency Fund? Ask yourself, if a real emergency happens, will you have the money to pay your bills? Insurance is one way to protect yourself against certain situations, but even the best insurance doesn’t protect against every financial problem. Also, insurance must be purchased and that should be part of your overall budget. It is separate from the emergency fund.
The unexpected is always to be expected in life! People who have an emergency fund to protect them from unanticipated events are going to come out in far better shape than people who do not. Those without an emergency fund are more likely to turn to credit and acquire new debt to help them out when emergencies arise. Even if it feels like you can’t afford to have an emergency fund, you really can’t afford not to have one.
How Much Should an Emergency Fund Have? It’s hard to say exactly how much an emergency fund should have because the amount of money you might need is based on how much money you make and how you live. The magic number is different for everyone. However, just because there isn’t a simple answer to this question, it doesn’t mean there isn’t expert financial advice you can follow. Some experts believe $1,000 is sufficient, while others advise that it’s enough to have the money to cover 3 to 6 months’ worth of expenses. Most experts agree that setting up your emergency fund is a critical step to financial security. Starting an emergency fund is as easy as saving a small amount, such as $25, $50 or $100, into a bank account that pays interest. Before you decide how much money to start with, be sure you have enough cash to cover your basic living expenses. Let’s practice what you have just learned.
Justin’s Emergency Fund
Name: ______
Scenario: Justin recently graduated from high school. He works at an appliance store, but expects to enroll in college next semester. He still lives with his parents and pays them a small amount for rent. He financed a used car and pays for his insurance.
Tyler has no emergency fund and he spends almost all of his money each month, except for a small college savings fund he set up at a bank.
Look at Justin’s expenses below. He has decided that he must set aside at least $2,000 over the next three months as an emergency fund. Answer the question on the chart, as well as the questions that follow.
Expense Each Month / Amount /- Can Justin save money on this expense? Yes or No.
Rent / $100
Car payment / $200
Car insurance / $180
Movie night / $40
Purchase lunches / $180
Cell phone bill / $80
Date night each week / $160
Gas / $140
Morning coffee / $80
Clothes / $200
College Fund / $180
TOTAL Expenses / $1,540
Justin’s Emergency Fund (continued)
- Look again at Justin’s expenses for one month. Decide which expenses he should reduce or eliminate to have an emergency fund of $2,000 in three months. (Remember he needs to have the emergency fund set up in three months, not one!) List your suggested changes to Justin’s expenses on the chart below.
Expense / Amount to be Reduced from the Expense / Reason for Reducing this Expense
- How much money did you cut from Justin’s total expenses? Did you reach the goal of having an emergency fund of $2,000 in three months? (Check your math!)
- How much will Justin have saved in one year if he continues to follow your suggested cuts from his expenses? What would you suggest Justin do with these additional savings?
Source: The reading an activity were adapted from information at
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