A natural disaster can significantly impact a family’s financial life. For example, in the aftermath of a hurricane, flood, or other incident, families often face skyrocketing costs for repairs and replacements that can significantly disrupt their finances. According to the Federal Emergency Management Agency (FEMA), around 40 percent of households affected by a natural disaster face long-term economic hardship as a result.
The best way to prepare for the potential financial impacts of a disaster is to have an emergency fund in place beforehand.
- Determine Your Emergency Fund Goal: Consider your current financial situation and decide on a realistic amount of money you would like to save for an emergency fund. Make sure to account for existing debt, any large expenses in the near future, and other financial priorities. Start small and work your way up if necessary.
- Open a Dedicated Bank Account: Open a separate bank account exclusively dedicated to saving for emergencies. Some banks offer specialized savings accounts specifically designed for this purpose, providing additional benefits like higher interest rates than standard savings accounts.
- Create a Systematic Savings Plan: Establishing a regular schedule of deposits towards your emergency fund will help it grow faster over time. Also, consider setting up an automatic deduction from your paycheck or bank account so that you can save without having to think about it each month.
- Monitor Your Progress Regularly: As with any financial goal, tracking progress regularly is essential. Tracking ensures that you remain focused and motivated while building out an emergency fund account balance over time.
Evaluate all aspects of the growth process and readjust accordingly if needed to stay on track with the set intentions for the emergency fund’s development trajectory over time.
Families need to be financially prepared for disasters. Therefore, in addition, it's also essential for families to review their insurance policies and look at the Declarations Page. An insurance declaration page summarizes the insurance coverage provided by the policy. The declaration page is usually the first page of your policy. Note: You should receive a new declaration page for each renewal period.
Many insurance policies don’t cover all aspects of damages caused by weather-related incidents, so it’s essential to research what is and isn’t included before an incident occurs.
For those who need assistance preparing for disasters and managing potential financial impacts, Miami-Dade County Extension offers resources as part of its Disaster Preparedness program. Access our UF/IFAS Disaster Handbook and more on the resource page. Link here.
Although no one can predict when or how severe a natural disaster will be, being prepared can help minimize the damage to both homes and bank accounts. We encourage families to identify risks associated with disasters and develop strategies to reduce those risks through education, training, and preparation.