How Families Can Financially Prepare for an Emergency

Today, many families live paycheck to paycheck, so having several months of emergency savings on hand is both a dream, and a necessity at the same time. The amount you need to save will depend on your household’s income and specific needs. For instance, families with multiple kids will probably need to build a bigger emergency fund than smaller families. 

Making a financial plan or an emergency is important. To start, you’ll first need to determine the kinds of emergencies you want to be ready for. This could cover medical bills, a new car, or a home repair. Creating a plan will help you better handle unforeseen financial setbacks – which will happen. The only question is when.

Get the Right Kinds of Insurance

Having insurance is essential when you have a family. But before getting a policy, I find it best to evaluate your needs and then pick the right coverage – based on your needs. Also, don’t forget about disability insurance, which will provide income if you become injured or sick and unable to work. 

Don’t forget, even if you consider yourself healthy, medical insurance can help cover hospital bills from accidents or illnesses. 

Homeowners, auto, or renters’ insurance can protect your property from theft or natural disasters. Life insurance is a wise family investment because it can guarantee payment (death benefit) to your beneficiaries if you pass away. But is term life insurance worth it for you?  No question, if you have children, or family members who rely on your income, you’ll want to have adequate coverage if you were to die.

Manage Your Budget

Managing your budget will help you take control of your financial situation, especially if you have little to no funds left after paying the bills. Keeping track (daily) of where your money is coming from – and where it’s going will help you spot any issues, like overspending. 

If budgeting sounds overwhelming, the first step is to frequently watch your checking and savings accounts, followed by credit cards. Watch the transitions like a hawk. 

Ensure You Have Instant Access to Your Emergency Fund

Ensure you have instant access to your emergency fund if something happens. Having immediate access to funds will prevent you from taking out high-interest loans to cover these unexpected expenses.  

A debit card linked to your emergency fund account can also be a good idea – if you can control yourself.  I like to keep the card safe (out of my wallet) so I can have access when it need it – at home.  

You may also consider opening a second bank account to have another option to keep things separate. 

Prioritize Paying for Emergencies

If you’re faced with an unexpected expense, make sure you don’t put off paying it. If you can’t pay the total amount at once, check if you can pay in installments. Even with interest, it’s still better than paying a lump sum, especially if money is tight. 

Also, avoid borrowing more money because this will leave you deeper in debt and worsen things in the long run. 

Have a Buffer in Place

Giving your budget a buffer is crucial so you don’t need to dip into your emergency fund when your income falls short. For example, you might consider adding 10% to your expenses, just in case. If you’ve maxed out budgetary categories, look for ways to save on groceries, phone bills, and other miscellaneous expenses. Consider canceling some subscriptions you don’t use much until you’re back on track. 

Final Thoughts

Being prepared doesn’t have to be difficult, but, if you’ve never created an emergency fund, I can certainly say that now is the best time to start!  Begin by creating a goal to build a surplus of funds each month, even if it’s not a lot. 

The amount you’ll need to save will depend on the size of your family, your current living expenses, and your household’s income-generating ability. But in general, you’d want three to six months’ worth of necessary expenses saved in your emergency fund. It may take some work, but I’m sure you’ll get there!