If no one depends on you financially, your path to financial security may be smoother than most. However, it also means that if the unforeseen were to happen, you may not have someone to rely on for support—financial or otherwise. That’s why there are certain considerations to take into account.
Protect What You Have
Most single people don’t need life insurance because no one depends on them financially, but there are exceptions. If you provide financial support for aging parents or siblings or have substantial debt you wouldn’t want to pass on to surviving family members if you were to die prematurely, you may want to consider it.
Disability insurance, however, is an important consideration. What would happen if you were sick or injured and unable to work and earn an income? Who would you rely on financially if something like that happened? How long would you be able to meet your financial obligations? That’s where disability insurance comes in. It will replace a portion of your income if you’re unable to work due to a disabling illness or injury.
Many larger companies and some smaller ones offer some disability coverage to employees through a group plan. If you think you need more, it may be worth buying additional coverage through your employer’s group plan, if available. Or, you could buy a disability insurance policy independently. Unlike group coverage, privately owned insurance stays with you even when you change jobs. To find out more about disability insurance and if you need coverage, use our Interactive Planner.
If You’re Just Starting Out
Putting off the basics when you’re just starting out like reducing debt, starting a savings program and planning for retirement only makes things more difficult down the road. The sooner you start, the better off you are.
You’ll want to create an emergency fund equal to three to six months worth of basic living expenses. When you consider all the demands on your monthly budget, the thought of setting aside money for long-term savings probably seems daunting. Fortunately, time is on your side. Through the power of compounding interest, just $25 a week set aside over 15 years builds a nest egg of more than $31,000, assuming a 6% annual return.
If you haven’t already, enroll in your company’s 401(k) retirement savings plan. As this will likely be the primary source of your retirement savings, the earlier you start, the better. Many companies even match employee 401(k) contributions, so by not enrolling, you’re essentially turning down free money.