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What could a financial emergency look like for your family? It could be the weather-related destruction of a home. It could mean sudden serious illness, injury or job loss for a family’s main breadwinner – or breadwinners. It could also mean round-the-clock, end-of-life care for a loved one who can’t afford the expense.
So what is a family financial emergency kit? There are some common elements to it, much like the water, bandages and battery-powered radio that the Ready.gov disaster supplies kit specifies. It needs to be a clear, well-organized set of useful documents, information and items accessible to everyone who needs to use them.
One family may keep all the contents in a waterproof, fireproof file cabinet or safe to feel confident they have things under control; many feel more comfortable housing everything in the cloud, away from potential water and fire damage. If you are concerned about storing these records in one physical location, consider digital storage devices such as web-based storage services, USB flash drives, external hard drives and network-attached storage hard drives. What matters is that the kit’s documents and contents are safe and secure and its organization fits the habits and preferences of the decision-makers who will need to use it.
Here’s what your kit might contain:
1. Estate documents. Estate planning is the highest form of financial emergency planning because it addresses the ultimate personal financial emergencies – medical incapacitation or death. Would your family have easy access to this material if something happened to you? In your family financial emergency kit, estate documents would include copies of current wills (for you and your spouse or partner), your advanced directives (which instruct doctors on end-of-life or other stages in medical care), health/financial powers of attorney (which designate specific individuals to step in to manage your money or healthcare if you cannot do so) as well as other documents that provide additional guidance for operating businesses and managing and distributing other assets you have. Make sure these documents are current and that contact information is included for all the qualified experts you used to prepare them – estate or business attorneys, tax professionals and financial planners.
2. Insurance policies. Being able to find home and auto policies in a natural disaster is a no-brainer, but it’s important to think a little more broadly. File as much policy and contact detail as you can for any health, disability, business, life and accident coverage you have – and remember that it’s particularly important to note or file documentation on this coverage at work, too. Sometimes we sign up rather blindly for work-based benefits only to realize how important they may be in a financial emergency.
3. Tax materials. If a family member dies or becomes incapacitated, tax matters still need to be attended to. If you work with a tax professional, make sure their contact information is in the digital or physical kit (see indexes, contacts and guides, below), but it’s also important to keep past returns and relevant supporting data based on your individual tax situation.
4. Investment, savings and retirement documents. If you work with a qualified financial planner or tax expert, you may have access to a particular system that lists and tracks this information in an organized way that many of us don’t have at home. However you plan and track your investments, it should be included in your kit.
5. Photos and video of your home and assets. Whether you store photos digitally or physically, it’s wise to keep shots of your property and possessions in case you suffer an insurance loss. Proving loss in a financial emergency is important – talk to your insurance representatives about the best evidence they require in proving claims to guide what you document.
6. Make copies of keys and access information. If you’re away from home when damage occurs or if family members need to access vehicles or spaces, make sure you have keys and access codes locked safely in your emergency kit. You will also want to ensure that your emergency contacts have the necessary access to your emergency kit in order to retrieve these materials.
7. Indexes, contact sheets and guides. Some people need a little guidance, others need a lot. A family financial emergency kit needs to be usable by all designated family members. Put yourself in the role of a friend or family member who’s been called in to help you in a crisis. If you had to step in to settle an estate, healthcare or disaster emergency for a friend or family member and they weren’t around to advise you, what information would you need to get started? In any category of information you include in a financial emergency kit, include a separate file or digital instruction that details people to call, account numbers if necessary, relevant online and physical addresses and other key data to advise that person about what’s in front of them and what they should do. If you work with qualified financial experts, make sure their contact information is included.
8. Safe, secure procedures for all physical and digital documents. If you’re storing your kit at home or at an outside facility, consider what you’ll need to use to keep them safe from fire, water, theft or any natural disasters. It may be as simple as a fire-and-water safe set of lockable file cabinets, maybe even laminating documents or storing them in plastic folders. Many have made the switch to storing important documents digitally to prevent them from getting lost or stolen. If you’re going the digital route, it is just as important to make extra encrypted USB flash drives and login information for web-based storage services accessible to your emergency contacts. Be mindful that the convenience of storing documents digitally has its own set of security and access concerns and you’ll need to make sure family members using the kit understand them.
9. Access to funds. If your executor or trusted individuals have joint access to a bank account established strictly for emergencies, you’re covered. But depending on the emergency, cash might be necessary. Evaluate the best choice to make it available if you think it would be needed.
Finally, know that one person’s secure environment might be risky for another. Before you build your financial emergency kit, get some helpful advice from trusted advisors on what documents you should select, the way you should organize your kit and finally, be mindful of risks like identity theft when you gather and store information.
Bottom line: Financial emergencies can take many forms – if you or another trusted individual needed your financial data in a hurry to deal with a crisis, would it be in an organized, safe place? A carefully thought-out financial emergency kit can alleviate loss, worry and help you make important decisions quickly.