As a parent, it’s your responsibility to provide for your family emotionally, spiritually, physically, and financially. Not only does that mean building a safe harbor for your family, but also to protect your family from the dangers that threaten that safety.
Providing this protection isn’t easy, especially if you’re living paycheck to paycheck. But if done right, the money spent or set aside for this purpose can be the most effective dollars in your budget.
5 ways to protect your family from financial crises
Not a week goes by that I don’t read a heartbreaking story about a parent dying in a freak accident or a child suffering from a major medical condition. In most cases, someone has set up a GoFundMe campaign to raise money for the family.
Unfortunately, there’s no way to protect your loved ones from all the bad things that can happen to them. But with proper preparation, you could reduce the financial devastation that comes with the unexpected, and limit the amount of help you’d need from others.
1. An emergency fund
Fewer than 4 in 10 Americans have $1,000 in savings, according to Bankrate’s Financial Security Index survey. And if something terrible happens like a job loss or disability, even more people would be in trouble financially.
One way to prepare for a rainy day is to set aside three to six months’ worth of your basic expenses in a savings account. This is just the necessities we’re talking about: housing payment, groceries, utilities, etc.
This won’t be easy, especially if you can only manage to save a little each month. But a little each month can make a big difference over time, and you’re guaranteed not to be ready for an emergency if you never try.
2. Health insurance
Let’s face it. If you don’t have health insurance coverage through your employer, you’re unlikely to get great coverage for cheap. Even with federal subsidies or employer coverage, you may still end up with a high deductible and high or no co-pays.
But having just the minimal amount of coverage could still prevent a big medical bill from turning into a full-blown financial crisis. In addition to traditional health insurance companies, also look into health care sharing ministries, which function similarly but don’t charge outrageous premiums for subpar coverage.
Whatever you do, protect your family from the financial stress of everyday health problems.
3. Life insurance
If you have a family, you need life insurance — no excuses. As invincible as you may think you are, tens of thousands of people die every year unexpectedly. Experts recommend getting 10 to 15 times your annual income. But it would be wise to look at all your needs before determining how much to buy.
If you’re young and healthy, you can get a basic term policy for under $10 a month. But if you can afford more, get more. If you’re not healthy, you may still be able to get affordable coverage through no-exam life insurance. These policies don’t require a medical exam so you won’t be judged based on your health. That said, these policies are typically more expensive if you’re healthy. So, don’t get one just because you don’t like needles.
4. Disability insurance
More than a quarter of today’s 20-year-olds will become disabled before they retire, according to the Council for Disability Awareness. In fact, you’re much more likely to become disabled than you are to die prematurely.
In some ways, disability can be harder on a family financially than premature death. Because not only do they lose some or all of your income, but the cost of your treatments and other needs can become a drain.
There are two types of disability insurance:
- Short-term disability insurance: This coverage can last up to a year and can cover a temporary disability or a permanent disability until your long-term coverage kicks in. You may not need this type of policy if you have a fully-funded emergency fund.
- Long-term disability insurance: This type of policy can cover you until age 65 or later and is meant for permanent disabilities. It’s possible that your employer offers this as a benefit. If not, be sure to buy a personal policy.
5. A side hustle
No one has complete job stability, and even the most qualified of employees or business owners can lose it all. To protect your family from a job loss or failed business, start a side hustle based on something you enjoy doing.
You don’t have to go hog wild with it right now, but make sure it’s something you could do to make enough money during unemployment that your family has some income. And who knows? It could end up being your future career if things work out.
Protect your family from all angles
As you do these things, you’ll be in a much better position to protect your family from financial threats. You’ll also have more peace of mind knowing that if something happens to you, your loved ones’ suffering won’t be compounded by money issues.
Again, all of these things may require some monthly investments. But in the end, it will always be worth it.