Emergency Fund: Are You Prepared for the Unexpected?
Daily, we face the risk of natural and manmade disasters, job loss and medical emergencies. Unfortunately, many Americans have no plans in place regarding these unexpected disasters. This increases the stress they face when disaster strikes.
|Infographics: Are You Prepared for the Unexpected? © CreditDonkey|
While you can’t prevent disaster, there is quite a bit that you can do now to help safeguard your family and finances in the event of the unexpected:
- Create an emergency savings fund so money is available to pay the bills if you experience a decrease in hours or are laid off. Most experts recommend setting aside enough to cover 6 months of expenses, some even recommend saving one year’s worth of expenses. To help ward off the temptation of using the funds for vacations or other non-emergency purchases, put the money in a separate savings account.
- Open an “emergency” credit card. Set the card aside so you know you have that line of credit available in the event of an emergency. While it’s not fiscally smart to solely rely on a credit card, it is nice having the additional funds available when there is a short-term financial need. The best bet is to find low interest credit cards, so you won’t have to face steep interest payments should you be unable to pay off the entire balance within the grace period.
- Set up direct deposit for all of your recurring income checks, whether it’s checks direct from your employer, from the Social Security Administration or from another source. This will help prevent lost checks in the event that you have to evacuate your home and relocate, keeping your income coming in so you are able to cover your expenses.
- Never assume that your homeowner’s insurance policy will cover all damages incurred. Meet with your insurance agent to review your current insurance policies. They will help you uncover any gaps in your current coverage and recommend any additional policies that will help decrease your financial risk.
- While meeting with your agent, also inquire about life insurance. This will help ensure your family doesn’t have to worry about finances while going through the grieving process. Life insurance can be uncomfortable to talk about (who likes to think about their mortality?) but it will put them in a better place financially.
- Remember to take time to review your health insurance as well. This will help you discover if you should open a supplemental plan. Also, when your family is looking to cut back on bills, always be sure to maintain your medical coverage. The monthly bill will be far less than what you will face if you have to get medical attention while uninsured.
- Education is key when it comes to medical emergencies. Enroll your family in CPR and first aid courses so everyone knows how to react when faced with a medical emergency. There are also certified first responder courses available in many towns.
- Become familiar with your local hospitals so you know the best routes in case of an emergency. Take the time to also review your health insurance so you know if there are hospitals that are not covered by your medical plan. Sometimes the closest hospital won’t be the best option for your family financially.
- Visit the following government run websites to learn additional emergency preparation tactics: Ready.gov, Fema.gov and bt.cdc.gov.
Build and maintain connections
- Networking can help decrease the amount of time it takes to secure a new job when your current employment is at risk. Participate in a variety of networking events throughout your career so that you can build relationships with professionals from a variety of companies and industries to help you start a last-minute job search.
- Maintain relationships with colleagues from your past companies. While you may not be interested in returning to a former employer, it is likely that many of your past co-workers will move on to new companies and may have a position that fits your skill set and needs when you find yourself without a job.
(Additional Writing by Meghan)
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Kelly Teh is a contributing features writer at CreditDonkey, a credit card comparison and financial education website. Our data-driven analysis has been recognized by major news outlets across the country and has helped young adults make savvy financial and lifestyle decisions.