Emergency Fund vs Insurance: What Should Be Your First Priority?

Setting aside money for unplanned expenses or financial emergencies like medical bills, a loss of income, car repairs, or home repairs can help tide you over difficult times and provide much-needed financial security. Everyone should save money to pay for the unexpected; it is just a question of how to save. The availability of various financial tools such as insurance, saving accounts, and emergency funds may leave you thinking about which tool would be your best option to keep your funds for financial emergencies.

Emergency Fund vs. Insurance

Choosing the most appropriate tool depends on several things such as your circumstances, the sorts of emergencies you might face, and how much insurance coverage you already have. For instance, if you are carrying high-interest debts, then keeping money for anything other than paying down those debts should be the last thing on your mind.

Similarly, someone who does not have a health insurance plan or has a plan that covers only basic Medicare services needs to prioritize investing in health insurance over an emergency fund. On the contrary, a person having a healthcare plan that covers doctors' services, outpatient care, dental and vision treatment, short-term medical products, and preventive services can choose to have an emergency fund to save money for unexpected expenses other than covered care services.

Opportunity Cost of Building an Emergency Fund

If you want to minimize risk for yourself or your family, you should consider investing in health insurance, home insurance, and auto insurance before setting up an emergency fund. The point is that building an emergency fund means you cannot spend on other needs and wants or pay down debt. In addition, the value of money is worth more now than in the future, so you must invest your money in suitable investment instruments like insurance and the stock market that offer more value for money in the future.

While an emergency fund may offer some level of financial security, the opportunity cost of holding such a large balance on your money in low-yielding investments is high. Therefore, consider having adequate health, auto insurance, and property insurance coverage to secure your financial future in the right way. Make sure you work with a reliable insurance agency in the USA like Starke Financial that can help you get Medicare Services, Life Insurance, Medicare, Obamacare, Dental, Vision, and Short Term Medical Products in FL, LA, AL, NC, SC, TX.