Picture a scenario where you need to borrow money from a friend to get home. You didn’t expect your lunch cravings to exhaust all the money in your wallet, and now you need about Rs. 50 to hail a cab. This instance is solely a small hiccup where all you’ve fallen short of is Rs. 50, but what happens when you find yourself in a graver situation?
What happens if you come up against a medical or household emergency and you need maybe a lakh, or even ten lakh rupees, what happens then?
The insecurity or anxiety that comes along with falling short of money is a feeling most of us try to avoid. But realistically, countless situations could potentially arise out of the blue, putting you at financial risk. Getting a headstart with situations like this is important, and that’s where learning about financial safety nets comes in.
The Kool Kanya learning pathway, ‘Finance Pass: Personal Finance Made Easy’ is your key to learning all about financial safety nets and everything finance because as they say, ”Save money and it will save you”.
In addition, we have something for those with interests beyond finance! With the Kool Kanya Power Pass, you can #RaiseYourPower and delve into digital marketing, content creation, consumer research and much more to get started with building the career of your dreams.
- Financial safety nets are important, let's discuss why
- So here are a few financial safety nets you may want to consider
- Emergency funds
- Health insurance
- Life insurance
- Tip: learn the importance of saving money
Financial safety nets are important, let's discuss why
In a world as unpredictable as ours, having a financial safeguard doesn’t seem so bad, especially since we tend to spend a few 100 rupees each time we blink. A financial safety net, just as its name suggests, is supposed to save you in times of crisis. This, however, does not mean that it will prevent you from a fall, but rather that it will help you get back up again.
What we mean is that an unpredictable illness, the loss of a job, natural or man-made disasters, are not things you can always avoid, but having assured financial safety and security in your back pocket can help you recover.
This ability to recover is why you need a financial safety net. While not every expense will weigh financially on your shoulders, some definitely will, and it's better to be safe than sorry in the eye of calamity.
So here are a few financial safety nets you may want to consider
- Emergency funds
You can look at an emergency fund as a rainy day fund—saved for unpredictable expenses. Such funds require you to be incredibly disciplined, which means you can’t touch the fund unless you face an emergency. So… good luck with that!
Since this is money you don't regularly require, the emergency fund rule of thumb is to save up an amount equivalent to the expenses you would incur over at least 3 to 6 months. So in case, you were to lose your job, or if your city experienced a flood, you would be able to get by without having to worry about expenses for those few months.
Situations like these can leave anyone distressed. Therefore, making an emergency fund investment to helps reduce the unexpected and negative impact of such situations. It makes your financial situation airtight!
Wondering about where to put an emergency fund?
Simple, a savings account is your best bet, this way you’ll have easy access to the money as and when you need it.
2. Health insurance
The unpredictable nature of health issues and the exorbitant costs that come with them can be a source of worry for a lot of us.
This is where health insurance comes in - accidents, surgeries, and general health issues are covered under health insurance policies, thus alleviating the stress that comes with having to pay for treatment. Today, due to an increasing number of people dealing with mental health issues, insurance companies cover mental illness as part of health insurance too.
Since every individual and the ailments they face are different it's up to you to do your research and find a health insurance policy that works the best for you.
3. Life insurance
Today, life insurance is seen as a necessity, especially if you have dependents. The burden of debts and bills won't be gone once you're gone, so you need to consider how the rest of your dependents would have to carry on living.
Before you decide on a life insurance policy, you need to ask yourself these questions:
- Do you have any dependents?
- Would they be able to pay any recurring bills or debts in the unfortunate incident of your passing?
- How would they come up with the funds?
Life insurance safeguards your dependents by helping them take care of such matters. The funds they will receive in the event of your death will at the very least not leave them hanging by a thread to pay those bills off.
Tip: Learn the importance of saving money
I know, saving money is not as easy as it used to be. You can’t just put a few coins in your piggy bank and call it a day. But let's say you finally begin saving money for a new phone, and out of nowhere, your fridge breaks down. A fridge is a household essential, without an emergency fund, your savings for the new phone will have to go into fridge repair expenses instead.
Yes, in the grand scheme of things, waiting a few more months till you get a new phone is minute. However, when it comes to financial security vs financial freedom, you need to choose both. So save your money and create that financial safety net for yourself, because it’s better to be safe than sorry.
So, to surmise, understanding the need for financial safety nets and financial security is important. This is why Kool Kanya has created the learning pathway - ‘Finance Pass: Personal Finance Made Easy’ - A course that will teach you how to achieve financial safety, give you a lot more financial safety tips and help you take control of your finances.
So why wait? #RaiseYourPower and join the course today!
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