5 Steps To Prepare Your Family for a Financial Emergency

More than half of the families in America are living paycheck to paycheck. According to the Federal Reserve, at least 32% of American families would find themselves in dire straits if a significant financial emergency occurred.

The typical rule of thumb is to save three-to-six months of your monthly expenses for emergencies. This looks different depending on your family situation. In theory, a couple with no kids will have more access to extra cash than a family of five might.

Regardless, you need a plan, and the first step is to decide what types of emergencies you want to prepare for — car repairs, hospital stay, hurricane or tornado damage to your home — and then take steps to ensure that you're ready for them when they happen.

Create a Buffer

Planning for financial trials starts with ensuring your budget has some wiggle room. If you're already at max spending, look for ways to save on insurance, groceries, cell phones, etc. You can also cancel services like entertainment subscriptions to create a buffer if needed.

Balancing your books is essential to managing your financial situation, particularly if you live paycheck to paycheck. It's important for you to keep track of how much money is coming in and where it's going out so that you can spot any problems before they become serious.

Balance Your Books

Prioritize Access

To ensure quick access to emergency savings, you may want to consider opening a second bank account. That way, you can quickly use the money in an emergency. If the account comes with a debit card, you can store that card in a safe place when needed.

Don't put it off when you're stuck with a sudden medical bill. If you can't pay for something now, take action as soon as possible. Don't borrow money to cover an emergency expense—that only makes things worse in the long run and leaves you in debt.

Pay for Emergencies First

Consider Insurance

If you're not already covered, consider taking out a few types of insurance. For example, life insurance can help your loved ones if you pass away unexpectedly, and disability insurance can provide income if you become sick or injured and aren't able to work.

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