It is never to early to try to learn from a natural disaster. In fact, the earlier you learn the better. One takeaway from the Coronavirus pandemic is it clearly shows the need for emergency savings, which so many families sadly lack.
The fact is when a natural disaster hits, almost by nature of the event itself you have very little if no time to prepare. This means you “go into” the natural disaster event with the emergency savings (or lack of them) that you have at the time. If a earthquake strikes, a pandemic like the Coronavirus, tornado, hurricane or some other disaster occurs, you may have minutes, hours, or a few days – not much more time than that.
Reasons for having emergency savings before a natural disaster
First of all, we can’t stress enough that you should have emergency savings no matter what, as it is a basic financial literacy concept. While the surveys and data points vary, most surveys shows that about 40 to 50% of American households have zero in emergency savings (such as the AARP showing 53% of households lack savings). About 40% of Americans can’t come up with $1000 is a crisis. As noted, there are many data points on this topic, but they all show the same thing – Americans are horrible at building emergency savings. Similar to how they are at financial literacy. Having some form of emergency savings well in advance of a natural disaster will help for many reasons. They include the following:
Need for supplies – Using the example of the Coronavirus, think about the need to pay for hygiene supplies, cleaning items, soap, paper goods and so much more. All of that is costly – emergency savings are needed to pay for it.
Missed work – When a disaster strikes, such as an earthquake or hurricane, you will often miss work. Emergency savings can help you pay for the basic needs (housing, food, etc.) when you miss income.
Childcare – A majority of households have children. Disasters, even including pandemics like the Coronavirus, may cause schools to close. This makes it difficult to find childcare, or pay for it, and savings can help here.
Sickness or injured – A natural disaster may cause you to get sick, such as a pandemic, or injured, such as an earthquake. A sickness or injury may not only cause you to miss work (income), but also lead to higher medical costs.
Those are just a few reasons why emergency savings are even more important in a disaster. But once again, they savings are critical to have year round.
How to build up emergency savings to prepare for a disaster
By the time a natural disaster it happens, it is too late. Or by the time a natural disaster is imminent, it is too late. As once you see a hurricane coming, or a Coronavirus pandemic starts to “break out”, it is too late. There, as financial literacy teaches, prepare now…even if just for the next one. Building an emergency savings, whether for a natural disaster or for everyday living, all comes down to the basics.
- Put aside money each paycheck and pay yourself first (before paying any other bills). Find out why to pay yourself first.
- Prioritize between needs and wants when it comes to spending.
- Do not go into debt, or if you have any, get help with it.
- Set a budget to account for emergency savings. Find how to set a budget.
- Take another job, including a freelance position or side gig.
- Reduce expenses, such as by cutting back on wants (like using a cheaper TV service) or finding deals, such as shopping or rebate sites, or countless other steps.
- Use technology to help you build emergency savings. Find a list of apps that help build emergency savings.
What does all this mean? Cut back on expenses and increase income. You need to do it to prepare for life in general as well as a natural disaster. Be sure to learn from this Coronavirus pandemic, and do not be caught flat footed for the next natural disaster with no emergency savings.
By Jon McNamara