You Can’t Be Financially Secure Without These 10 Products

Remember Murphy’s Law? Make your finances rock solid with these 10 financial products.

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Better Investing

Being money smart is about more than having a budget and eliminating dumb purchases. It means creating a financial foundation that will carry your family comfortably through whatever life throws your way.

To create that foundation and find lasting financial security, you need to own these 10 products. (Hint: You’re about to hear a lot about insurance.)

1. Checking account

Let’s start with the basics. You need to have a centralized place to manage and monitor your money. After all, it’s hard to have a balanced budget if you have only a hazy idea of where your money is going.

Prepaid cards are an increasingly popular option, but they can come saddled with a lot of fees. Plus, disclosures for these cards can be spotty, making it hard to know exactly how much your card is costing you.

Instead, look for a free checking account. Many institutions have scaled back their offerings, but there are still ways to get free checking from a bank or credit union.

From our Solutions Center: Find a better checking account in seconds

2. Debit card

Along with your checking account, sign up for a debit card. Make sure it has a Visa or MasterCard logo and can be used like a credit card.

Having a debit card can eliminate your need to go into debt for purchases, particularly those where it is impossible to use cash or a check. Although I know that some people are fans of credit cards, my personal experience has shown the temptation to overspend when buying on credit negates card benefits for many people.

If you can’t bear the thought of giving up your credit card rewards, look for a bank that offers a debit card rewards program. After backing away from such programs, many banks have brought them back.

3. High-yield savings account

Every household should have an emergency fund; it’s your own personal form of insurance.

Typically, you’ll want your fund to be large enough to pay at least three to six months’ worth of expenses. Since that can be a fairly significant amount of money, you don’t want the cash languishing in a typical savings account where it will earn next to nothing.

Savings rates aren’t great right now, but if you park your money in an online account or a money market account, you may be able to yield close to 1 percent on your emergency fund.

4. Health insurance

Let’s forget for a moment that you are now required by law to have health insurance.

Instead, let’s talk about the enormous cost of health care in the U.S. If you walk into a New Jersey hospital with chest pain, you could walk out with a nearly $33,000 bill, says Governing magazine.

You may think you’re healthy and young, but even healthy and young people get in car accidents, or can be struck down by devastating illnesses. Unless you’re worth millions and can easily pay your own bills, going without health insurance is just plain dumb.

5. Homeowners or renters insurance

If your home burns down, will you be left on the street?

Unfortunately, that’s what happens to some people who fail to insure their property. Homeowners policies are relatively inexpensive for the coverage they provide, so there is no reason not to own one.

These policies pay to rebuild your house in the event of a total loss. They also give you the funding to repair storm damage and vandalism, and will likely pony up the dollars needed for temporary housing in the event you can’t stay in your home during repairs.

However, don’t expect your policy to cover damage from flooding. You’ll need a separate policy for that.

If you’re renting, don’t think your landlord’s homeowners policy will pay for your stuff. Instead, cover yourself with some cheap renters insurance.

From our Solutions Center: How to quickly shop insurance

6. Auto insurance

A car may be your most valuable asset aside from your home.

While many states require you to carry at least a minimal level of coverage, you may want to consider more, depending on your assets and income. See “How Much Car Insurance Should You Buy?” from partner site CarInsurance.com.

For more information on how to get coverage you need at a price you can afford, we’ve put together 10 tips to cut car insurance costs.

7. Disability insurance

Disability insurance can trip up some otherwise money-savvy individuals.

Disability insurance provides money in the event you are unable to work for an extended period of time. The details may vary by policy, but most generally provide payments equal to 60 percent of your gross income.

If you’re on the fence about whether to buy disability insurance, consider whether you have a big enough emergency fund to pay the bills if you are unable to work. Social Security disability payments provide benefits if you are unable to work for at least a year or are terminally ill. But even if you’re approved, there is a six-month waiting period before benefits begin.

Disability plans are often offered through voluntary workplace benefit programs, or you can purchase coverage directly from insurance companies. For more information, read Stacy Johnson’s primer on disability insurance.

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Comments

  • Terry Sanders

    Item number 3 was a real laugh: “High-Yield Savings Account”. In what universe that people who read these columns come from, does 1% amount to a “High-Yield”? That would mean my 10 million dollars would provide me with 100 thousand a year! And no doubt, readers of MoneyTalk have at least 5 to 10 million dollars casually laying in offshore accounts.

    If the author didn’t think he was joking, he should reassess his perception.

    And from item no.9: “make sure you have another source of income for your golden years”. That’s almost as wise as the recent suggestion to cure all poverty that issued fourth recently from one of those imbecile-savant billionaires: “If you’re poor, just make more money.”

    • Debbie Chen

      LOL yeah. Tell me about it… High yield savings account? You won’t be able to get any good interest %. Maybe 0.1%… better off just keeping it in a savings account. Even if the avg reader here has $30k in the bank, they would only make pennies off the current rates.

      Also, why would you use a debit card over a credit card? Assuming you are not dumb and pay it off in full every month, the credit card offers more protection and rewards. The debit card does not. I’ll use my credit card 100/100 times over the debit card. The only thing debit cards are good for is withdrawing money at ATM’s, or getting cash back on purchases at a 711 (when no non-fee ATM’s are available).

      For auto insurance, you don’t need anything but the required amount by law in your state (unless you live in NH, then I’d get a little more). A $25/month policy from Insurance Panda is more than enough for whatever you need. Anything more will just put extra $$$ in the hands of the insurers.

      Life insurance isn’t necessary if you save wisely. Same thing with retirement fund, disability insurance, and college savings account.

      You can tell this article was written by a “financial adviser” because the only person who stands to gain from this advice is somebody who hawks life insurance, annuities, retirement investments, etc. The only money advice the average person needs (in America) is: live within your means and save as much as you can.

    • Jason

      1% is high-yield compared to the 0.15% my credit union is offering. That is why we have moved our emergency 6 months of expenses out of our credit union and into I-Bonds.

      It is wise to have savings outside of social security for retirement. That is what the author is referring to when she says that is important to have another source of income. Income from investments, retirement accounts, savings, etc. Someone that relies solely on social security for retirement will spend their final years in poverty.

      • Issabella Paris

        I found a CD online that pays in excess of 1%, so I parked some funds there, making sure I wouldn’t need to withdraw before it matures.
        About saving early: I share with younger workers how important it is to find $10, $20, $50 a month…basically anything, and get savings started specifically for retirement only. I struggled for many years, but started (late, by most standards,) with $10 per paycheck. Seeing what you’ve accomplished after a couple of months or years is very satisfying, its own reward.

  • Patrick Seitz

    Great list, but I disagree in part on number 2. For me personally, using credit cards instead of debit cards is preferable not just because of the rewards points but because of the security. Anecdotally, I’ve heard time and time again of friends and colleagues whose debit card information was stolen by an identity thief and it taking several weeks before the bank returned the funds to them, or the hassles caused by holds placed by hotels or car rentals that prevented them from making other purchases with their own money. I’ve had to contest a few charges on credit cards before, which was quick and painless, but also not such a big deal because it was the bank’s money on the line and not mine.

    • Jason

      I agree. I have a debit card but I use it on the rare occasion I need to get cash from an ATM not for normal purchases. I’ve had fraudulent charges on my credit card once. Chase only let one fraudulent charge go through, declined several others and contacted me immediately. I had a new card the next day.

      It is also possible to go into debt with a debit card. It is rather easy to go shopping one afternoon, rack up 5-6 overdraft fees due to the way the bank structured your transactions, and owe $150-$200 in fees.

  • Dave G

    The list is a good one, but the discussion of debit cards should say “you can pass on this suggestion if you are that rare person who has not paid any interest on a credit card in (say) 2 years”. Actually, speaking for my wife and myself, we have paid none in the past twenty years. It’s perfectly doable……..

    • Jason

      I don’t use my debit card to pay for purchases. My money is deposited by direct deposit or online and I withdraw money from an ATM using my debit card. I see no reason to physically visit my Credit Union.

    • http://ecofrugality.blogspot.com/ Amy Livingston

      Not only doable, but actually done by about 40 percent of all credit card users. I think this constant harping on the theme that no one should ever use a credit card, because it’s literally impossible to control your spending with them, is just ridiculous. If I’ve never carried a balance in the twenty years I’ve had my card, why should I suddenly trade it in for a debit card (and the weaker consumer protections it carries)?

      • Dave G

        Since we agree, you must be right :). Seriously, I didn’t know that 40% number – it’s more than I would have guessed (probably because of the “constant [negative] harping” you mentioned) …..

  • chris brown

    Are college savings plans FDIC insured? From what I read online you can lose the $$ you invested if the market tanks. Is this true? Why would I not just put it in a savings account?

    • Anonymous

      The 529 plan I have for my child is not FDIC insured. It is subject to market fluctuations. That said, it has grown more in value following the market than it would have in a savings account at less than 1%. It’s a gamble, just like a 401k or IRA. But for long term savings it’s a better return. With post secondary costs rising at the ridiculous rate they are, it’s worth taking on some risk.(imho)

  • Jason

    I agree with most except disability and life insurance. At some time in a persons life they should have these but they don’t need them for their entire life. Life insurance and Disability insurance are important to have when you are young and don’t have a lot of savings. As one gets older, saving should increase until life insurance is no longer required. A 20 or 30 year term policy purchased in one’s 20’s should work for most people. Yes, their are estate planning advantages to life insurance but the average family doesn’t have a large enough estate to work about that.

    The same goes for disability insurance. More important than life insurance when someone is young but something that you should grow out of.

    • http://ecofrugality.blogspot.com/ Amy Livingston

      Not to mention, why do I need to be covered by a life insurance policy if my husband isn’t actually dependent on my income?

  • http://financeclever.com/ Finance Clever

    Good article. We have to disagree with a few:

    – Renters insurance: if you have so much stuff as renter that you feel the need to insure it, you probably have too much crap and should look into selling some of it. These should free up some cash that you can then invest, along with the savings from not paying the premium anymore.
    – Auto insurance: if you have a car so expensive that you could not replace it with cash, you are driving a car that is too expensive for you. This ties up a good chunk of cash that could be put to better use. If this is the case, sell your car and buy one that is more affordable so that you only need liability insurance. So you can also put the insurance monthly savings to work.
    – If nobody TRULY depends on you economically, this is a total waste of money.

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