Being money smart is about more than just having a budget and eliminating dumb purchases. It means building a financial foundation that will carry you comfortably through whatever life throws your way.
To create that foundation and find lasting financial security, you need these products:
1. High-yield savings account
Some of the best rates are being offered by online banks, such as CIT Bank, which is offering up to 1.8% APY as of publication.
2. Checking account
You need a centralized place for your money, so look for a free checking account. Fee-free accounts are a bit harder to find these days, but some banks and credit unions still offer them.
Along with your checking account, sign up for a debit card. Such cards can be useful, but don’t assume they are great for all purchases. For more, check out “9 Things You Should Never Pay For With a Debit Card.”
3. Health insurance
Health care can come with an enormous price tag, especially if you develop a serious health condition.
You may think you’re young or healthy, but even the most robust people get in car accidents and can be struck down by devastating illnesses. Unless you’re worth millions and can easily pay your own medical bills, going without health insurance is just plain dumb.
Another way to help manage medical costs — and lessen tax woes — is to start a health savings account. To learn more, check out “3 Reasons to Get a Health Savings Account.”
4. Homeowners or renters insurance
If your home burns down, will you be left out on the street? That’s what happens to some people who fail to insure their property.
Homeowners insurance policies are relatively inexpensive for the coverage they provide, so there is little reason not to have one. These policies typically pay to rebuild your house in the event of a total loss, such as from a fire. They also generally give you the funding to repair storm damage and vandalism.
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 insurance policy will pay for your stuff. Instead, cover yourself with some cheap renters insurance.
5. Auto insurance
Aside from your home, your car may be your most valuable asset.
While many states require you to carry a minimum level of coverage, you may want to consider getting additional car insurance coverage, depending on your assets and income.
Technology startups have made the process of getting the best new car insurance policy easier than ever. Our favorites for comparing quotes without the traditional hassle are The Zebra and Gabi. They can get you competitive quotes in just minutes.
6. Disability insurance
Not having 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. The details may vary by insurer and policy, but one way to simplify the process is to get quotes here, through our partners at Policy Genius.
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 benefits provide payments if you are unable to work due to a medical condition that is expected to last at least one year or result in death. But you also have to meet other requirements. And even if you’re approved, there is a five-month waiting period before benefits begin.
7. Life insurance
If you were to die tomorrow, could your family pay the bills? Do they even have the money to bury you?
Unless you have plenty of cash in your coffers, you need to at least consider whether you would benefit from life insurance. Even if you’re wealthy, you might want a policy to help the family pay off estate taxes.
If you have no dependents, however, you might not need life insurance. We break this down in “7 Reasons You Don’t Need Life Insurance.”
Getting life insurance traditionally has been a bit of a hassle, but apps are changing everything. Two of our partners, Policy Genius and Haven Life, can provide you with online quotes for term life insurance in just minutes — and a medical exam may not be required to get insured.
8. Retirement fund
Someday you’ll want to retire, but don’t plan to live off Social Security alone. It was never meant to be the sole source of retirement funds. So, make sure you have another source of income for your golden years.
Your first stop for retirement savings should be a 401(k) plan, especially if your employer provides a match of any kind. After that, look for a similar tax-sheltered plan, such as an individual retirement account.
9. College savings account
If you’re childless and plan to keep it that way, you can take a pass on this must-have financial product. Almost everyone else should start planning for college costs now.
Two common ways to get tax benefits for your kid’s college fund are 529 college savings plans and Coverdell Education Savings Accounts. However, you must use the money for educational purposes or you’ll get hit with a tax penalty.
If you aren’t confident you’ll actually be paying college expenses for your children, you may want to put money aside in an investment fund. Then, if they get a full-ride scholarship or burn out in the first semester, you’ll have a nice chunk of money invested for retirement.
10. Emergency savings
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.
Would you add any tools to this list or remove any from it? Sound off in a comment below or on our Facebook page.
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