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“Ask The Experts” is written and provided by Scholarship Media. It does not reflect the views of The Collegian or its advertisers.
My dad was recently in a car accident. Thankfully, it was a really minor one! When I mentioned that I was glad he wasn’t hurt physically (and that the damage to his car wasn’t too bad, either), I wasn’t surprised to hear my dad agree. But I was surprised to hear him immediately follow up by mentioning money. My dad was glad he wasn’t killed or injured, of course, but he was also relieved to not have to deal with medical bills or really expensive car repairs. I was kind of surprised that this would even cross my dad’s mind after an accident, but the more I thought about it, the more it made sense: the financial cost of getting hurt or ruining a car might not be as dear as losing quality of life, but it can be pretty significant.
And since it won’t be too long before I graduate and need to take care of my own financial situation, that got me worrying. What can I do to make sure that a sudden accident or costly incident doesn’t wreck my finances?
It is, unfortunately, a fact of life that many upsetting incidents can be nearly as costly financially as they are psychologically and physically. We can indulge in political debates about healthcare and warnings about insurance for disasters, break-ins, and other sudden events, but there will always be ways to be hit by a sudden expense. And that’s bad news for Americans, because the majority of us could not handle a sudden $500 expense without going into debt.
So what can you do? For starters, you can protect yourself from as many of those expenses as common sense dictates you should. You may not need tornado insurance in New York City or car insurance if you don’t own a car, but you should have coverage for all the relevant basics: healthcare, homeowner’s or renter’s insurance, and insurance for the vehicles and properties you own that covers the types of disasters that could strike your region. Pay attention to the policy, too: some types of car insurance offer more coverage for accidents than others, say specialists at Main Auto Body in Corvallis, Oregon.
You can also beef up your savings with the help of government programs like tax-advantaged health savings accounts. Tax-advantaged accounts limit how you can spend the money you save in them, but the more wisely you use them, the more you’ll be saving overall (thanks to your tax discount).
Ultimately, though, there aren’t that many shortcuts. The reality, say actuaries at East Syracuse, New York’s HighPoint Advisors, LLC, is that there’s no substitute for old-fashioned saving and investing. If you want to be able to weather that $500 expense most Americans can’t, you’ll need money on hand in the event of an emergency–and that means you need to consciously budget, save cash, and build an emergency fund. Experts recommend having enough in your emergency fund to cover three months’ worth of expenses–though that’s a minimum, and some recommend having as much as nine months’ worth saved up. Further savings should be invested or, at the very least, saved in a savings account (where interest rates will be higher than in checking accounts).
With luck, it will be a long time before you run into an unexpected expense. Someday, though, you almost certainly will–so plan wisely and be ready! Protect yourself as much as you can, and save up a safety net for the things that can’t be reasonably planned for. If you act wisely, you can rest easy.
“A simple fact that is hard to learn is that the time to save money is when you have some.” — Joe Moore