5 Financial emergencies and how to prepare for them
An unexpected event can come with unanticipated expenses. While you can’t prepare for every eventuality, knowing the types of potential financial emergencies can minimise the financial impact they have.
To effectively handle financial emergencies, you need to start putting money aside before disaster strikes. It is wise to have 3 to 6 months of your monthly salary saved up for emergencies.
Here’s how to get started on those safety nets.
What is a financial emergency?
A financial emergency is any event that creates an unexpected and unintended expense. It can happen to anyone at any time and involves a high cost for something that you need immediately.
Not having money to cover this expense puts a significant strain on your finances, and possibly your health, and since it happens without warning and is often urgent, you don’t have time to plan or budget for it like you would for a wedding or vacation.
Examples of financial emergencies
Here’s what financial emergencies (could) look like and what you can do to prepare:
Natural disasters
Floods, fire, hail, lightning, wind and more can create costly expenses to your property.
What you can do: Insurance is crucial, but in between the event and getting paid out, you need money to take care of your immediate needs. A PureSave Account lets you save and earn interest, while being able to transact at the same time. Plus, you have anytime access to your funds.
Unanticipated car or home expenses
These can be costly and inconvenient and can range from simple fixes to longer-term projects that you can’t claim insurance for, such as replacing an appliance, dealing with water damage or mould, and getting your exteriors fixed before the rain comes.
What you can do: Besides keeping up with maintenance, setting money aside in a PurseSave Account gives you the flexibility to add to it as and when you want; you earn a competitive interest rate and have immediate access to your money when you urgently need it.
Medical emergencies
Medical emergencies usually involve something that needs immediate medical attention. It can range from a trip to the emergency room or emergency surgery needed after an accident to having unbearable toothache and urgently needing a dentist.
It’s unlikely to be something you can postpone, and it can cost you thousands. Plus, there are often related expenses, such as blood tests, scans or overnight stays, and some specialists charge more than the medical aid rates.
What you can do: Even with a medical aid, you could have payment shortfalls that you’ll have to cover out of pocket. Gap cover helps you bridge that difference.
Suddenly losing your income/ability to work
Losing your job or suddenly being unable to earn a living because you got ill, injured or disabled can be devastating for your family and your finances. Losing your income will affect your immediate cash flow and could place a significant financial burden on your household.
What you can do: Prepare for what you can’t predict with income protection insurance. Paying towards it helps you secure the financial help you’ll need to cover your expenses if you are unable to work or earn a salary.
Death in the family
Whether expected or not, a family member’s passing can create financial burdens for those left behind. There are costs associated with saying goodbye but also the worry of who is going to take care of those left behind and how they will remain financially sound.
What you can do: Life cover and funeral cover will take the immediate and future financial pressure off those left behind. A funeral plan helps provide a dignified send-off without going into debt, and life cover provides financial security to support your family’s future.
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