Nothing can prepare you for an unforeseen medical emergency. It can be a time of physical, mental, and emotional turmoil. But being financially ready can help you avoid scrambling for funds when your energy can be used on other priorities. But if you’re ill-prepared, a medical emergency can rack up large costs and put a significant dent in your savings. That’s why, in today’s world, everyone should have an emergency medical fund.
What’s a Medical Emergency Fund?
A medical emergency fund is money set aside specifically to cover any sizable medical surprises. It should always be in addition to a dependable health insurance, and it acts as a safety net for instances that require immediate care. Although it might be impossible to predict the kind of expenses, having a fund can certainly help mitigate the setback.
What Should it Comprise?
The size of your medical fund will depend on variables like disposable income, monthly expenses, number of dependents, your current health, your medical history, health insurance coverage, etc. If you’re a young, single, healthy individual, the golden rule is to save three to six months’ worth of expenses in a high-yielding savings account. If you’re a caretaker or the breadwinner in a larger family, you might want to have at least a year’s worth of expenses saved.
How to Start?
It’s easier to start by saving 5% to 10% of your monthly income. Then, progressively increase the percentage as you get more comfortable. As with any kind of savings, consistency is key. You can set up automatic transfers every month into a dedicated savings account. Set a goal and track your progress regularly to be more efficient. Furthermore, if you have any surprise earnings like tax refunds or a bonus at work, add it to your emergency medical fund to give it a boost instead of spending it or leaving it in your salary account.
When to Use the Fund?
The goal is to tap this fund only for expenses directly related to a medical emergency. If you withdraw money from the account, try to replenish it as early as possible.
Having a reserve fund for medical shocks can help you avoid loans that can balloon into a massive debt. Start building your medical emergency fund as part of your financial plan, so you can have peace of mind in case a medical emergency does knock on your door.
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Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.