Your Emergency Fund after 50: Be Prepared and Be Aware

I was attending the FinCon2019 conference when my brother called to tell me our mother had died. Since that time, I had been in a mind-numbing blizzard of power of attorney (POA) activities, funeral planning, family dynamics, client overload, and a broken refrigerator.

Even though, her death was 5 weeks ago, my mental and emotional state has taken a hit. I realized at the end of September that I needed to put on hold client (income-generating) activity to manage all the tasks as POA and executor, plus to take time for me. Thankfully, my clients are understanding and have graciously offered me a brief sabbatical as I attend to my mother’s affairs—and time to grieve.

As a result, that meant I would rely on my emergency fund (EF). Thankfully, I have enough to last me for the duration I’ve given myself—approximately 6 weeks. By mid-November, at the latest, I will return to my normally scheduled income-producing activities.

Here’s how my math worked out.

At the very least, I can survive with $1900/month. That’s my standard living expenses when no emergencies pop up. I have a 5-month emergency fund saved up. Being a minimalist and highly frugal, I gave myself the challenge to spend only $2500 during this time, $350 less than my normal monthly expenses. It seemed easy enough until:

• My daughter requests money for an emergency auto repair.
• My refrigerator dies and I must purchase a new one. *As I await delivery, I implement the following adaptation: since the freezer still works, I freeze water to fill my coolers—a similar activity to camping.
• My brother, who was on FMLA (family medical leave act) requests money for his return home.
• Over the weekend, bedbugs were discovered on my mother’s couch from a storage unit. Pest control costs a minimum of $750!

Points to ponder:

• The refrigerator is one of those unexpected things that fall upon me and my financial situation.
• The bedbug issue is a true emergency!
• The financial needs of others are more complicated and must be carefully evaluated.

When those we love are involved—and our personal finances are caught in the middle—it opens a difficult case of tough love. I won’t go into the decisions I made or the results of those decisions, but it was the impetus for writing this blog. As a parent, caregiver, power of attorney, and executor, you will likely encounter similar scenarios at some point in your future. How you prepare for them will make your future decisions less complicated. Additionally, with the unexpected cost of the refrigerator AND the cost of pest control, I must nudge a little deeper into my emergency fun. I may limit my “time off” to 4 weeks instead of six.

NOTE: I am not an accountant, an attorney, or a financial advisor. The suggestions below are from asking similar questions to these same specialists I hired to help me with my mother’s affairs.

Here’s what you can do to plan and prepare:

Principles of an emergency fund: an EF covers everyday living expenses—typically a minimum of 6 months of readily available money. These emergencies occur most often during an unexpected job loss, health emergency, and sometimes a vehicle or household expense—a new roof following a severe storm, for example. In my case, I chose to take time off from client work to manage my mother’s final arrangements. For those over 50, a job loss or health issue can force an unplanned or unexpected early retirement. Having this fund available offers great peace of mind as you make arrangements for income alternatives.

Know the situation: when asked for money (by other family members), especially when following the death of a parent or spouse, most often you’ll be aware of an adult child’s or sibling’s financial status. Be careful not to fall into the “I want to do the right thing” trap when fulfilling requests, especially when that money could come from YOUR emergency fund. Similarly, if a family member suggests, “You can reimburse yourself from [a deceased’s] account”, it’s best to state all accounts must remain untouched until all affairs are closed and settled. Plus, it is a true statement.

For the sake of your emergency fund: use it only for your emergencies! If, as a beneficiary, you desire to start an EF for your children once you receive your beneficiary funds, you may wish to educate your children (of any age) ahead of time of the value of having an emergency fund. Let them know that your EF is for you only. Also help them understand that the cache of money IS NOT for vacations, pedicures, or a new tattoo! If the EF money is poorly spent, then that removes you as the back-up source for money. Once again, tough love must lead the charge, and it’s a necessity to establish early.

Does the deceased have an emergency fund? If so, it may provide a solution on how you can help immediate family members, particularly beneficiaries. Beware, however, to limit that EF financial help. You don’t want everyone asking for something; I had a curious family member ask if there was some spare cash to help with a small financial dilemma. Additionally, before you consider divvying out the deceased’s emergency fund, determine what debt and bills are outstanding before you offer. No one will return the money if a bill suddenly shows up and requires immediate payment. Guess whose emergency fund it may come from instead?

Starting your emergency fund: hopefully, you have been saving a portion of your income every month since the beginning of your employment years. Mine took a heavy hit following my divorce (see Suddenly there’s Half: Financial Recovery After Divorce) and I’ve recovered most, but I’m still building it up—and will continue…forever. The most important feature of an emergency fund is to have it readily available, or in financial terms, “liquid”. This means your bank’s savings account or money market fund would be good options. You won’t earn a lot of interest, but it beats paying a high penalty or additional taxes for prematurely accessing other assets.

Final notes:

Everyone’s emergency is different, but after 50, there tend to be a few extra people and scenarios involved: parents, partners, and adult children. Sometimes, even siblings can make a call—especially when they know you are the power of attorney for another family member’s finances. How you prepare for these circumstances will offer financial security for yourself and help to minimize conflict in the future.

Kristen Edens