Most parents have experienced an unexpected cost. Whether it’s a bill that’s higher than expected or an unexpected expense that pops up, having a small financial buffer can make life feel more manageable.
Recent data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey shows that around 27% of Australian households had at least one person who would be unable to raise emergency funds if needed.1
An emergency fund is money kept aside for costs we do not see coming. Children may not have adult-sized bills or responsibilities, but they can still learn the value of keeping a little backup money for unexpected costs.
So, how can parents and carers help kids start building that habit?
Four practical ways to build the habit
1. Start small
Kids do not need large amounts of money to learn the concept of an emergency fund. Setting aside a small portion of pocket money, gift money or earnings from casual jobs can help establish the habit.
Consistency matters more than the dollar amount.
For kids who receive regular pocket money, setting aside a portion each time they’re paid can help make saving part of their routine. Kit PayDay Splitting feature is one way families can practise this by splitting pocket money between spending and saving.
2. Create separate savings goals
Many kids find it easier to save when they can see the purpose of their money. Consider separating money into categories such as:
- Spending
- Saving for a goal
- Money for unexpected costs
Whether using jars, envelopes or digital tools, separating money helps reinforce that money set aside can serve different purposes. In Kit app, kids can create a Stack for their rainy day money, helping keep it separate from their everyday spending and other savings goals.
3. Slow spending down
Parents often celebrate when a child reaches a savings goal and buys something they want. It is just as important to recognise the quieter achievement of being prepared.
When a young person uses their own buffer to cover an unexpected expense, it shows planning, responsibility and self-control.
4. Model the behaviour
Children learn a great deal by observing adults. Talking about planning for unexpected bills, insurance excesses or household expenses can make emergency savings feel normal and achievable.
You do not need to share detailed financial information. Even simple conversations about planning ahead can provide valuable learning opportunities.
Why a money buffer matters
A financial buffer can help households manage surprise expenses and financial shocks when they occur.2
When families have savings available, they often have more options when unexpected costs arise. Instead of relying on credit or searching quickly for money, they can draw on funds already set aside.
For kids, this is a powerful shift. Money is not only something to spend. It can also provide security, choice and breathing room.
The confidence benefit
One of the biggest benefits of a rainy day fund is often psychological rather than financial.
Knowing there is money available for the unexpected can help people feel more prepared and in control. Even a modest amount can provide reassurance and for kids, this can be an important source of confidence. They learn that while they cannot control every situation, they can prepare for uncertainty.
Why saving can be difficult
Humans naturally place more value on rewards we can enjoy today than on benefits we may receive in the future. Researchers refer to this tendency as present bias. Studies have found that people who focus more on immediate rewards are generally less likely to save for future needs.3
Kids experience this too. Spending money on a new game, clothing item or social activity today often feels far more appealing than saving for something that may or may not happen later. That is why backup money works best as a regular habit.
Regularly setting aside even a small amount helps kids learn that saving is something they do on purpose, not only when there is money left over.
Teaching kids to expect the unexpected
Parents and carers can use everyday moments to explain why it helps to keep money aside for unexpected costs.
For a young person, unexpected expenses might include:
- Replacing lost sports equipment
- Contributing towards a school camp or excursion
- Repairing a cracked phone screen
- Replacing a damaged bike helmet
These situations show kids that not every expense can be planned in advance. A small reserve gives them more choices when something unexpected happens.
Rather than framing emergencies as something frightening, it can be helpful to explain that unexpected expenses are simply a normal part of life.
Financial resilience matters
Unexpected expenses can happen to any family and every family’s circumstances are different. Even so, the finding points to an important lesson: a little money held back can make a meaningful difference when unexpected costs arise.
Teaching kids to build savings habits early can help prepare them for the financial decisions they will face as adults.
Building a lifelong habit
A savings buffer is about more than money. It teaches planning, patience and problem-solving. It also helps kids understand that while they cannot predict every challenge, they can take practical steps to prepare.
Most importantly, it helps build confidence. An emergency fund may start with a few dollars set aside each week, but the habit it creates can support financial wellbeing for years to come. Want to keep practising the habit at home? Kit’s Goal Tracker can help kids choose something they want to save towards and track their progress along the way.
For more practical money tips and resources, follow @kitappau on Instagram and Kit on LinkedIn. You can also explore more from Dr Tracey West at Marshmallow Money and on LinkedIn.
References:
1 Australian Bureau of Statistics, Making Ends Meet. Supplementary HILDA analysis found that 27% of households had at least one person unable to raise emergency funds when needed in 2023.
2 ASIC Moneysmart, Save for an Emergency Fund.
3 Xiao, J. & Porto, N. (2019). Research examining present bias and saving behaviour.
Dr Tracey West is a financial literacy specialist and founder of Marshmallow Money Australia. With a PhD in Finance and more than 12 years of experience researching financial behaviour, she is passionate about helping young people develop the knowledge, skills and confidence to make informed money decisions. Her work focuses on making financial education practical, engaging and accessible for families, schools and communities.