Divide and conquer
Everyone gets sick at some point at their life. Most only have to deal with passing illnesses, such as the flu or digestion problems, while others battle with chronic and life threatening illnesses. No one can know if they will be spared from a hard illness.
That’s why it’s important to save and prepare for the unexpected.
Saving around 2% to 5% of income each month for medical costs should be enough.
The best move is to divide the savings for medical costs into two groups. The first group should be reserved for life threatening conditions and hard illnesses. The second group should be used for treating easier and more conditions.
The 80/20 balance can be used to divide the portion of savings going to these two groups. Allot 80% of your health savings to the first group, and 20% to the second group. That way, you will have enough money to treat your common cold, and you will feel a sense of financial safety in relation to harder illnesses.
Money going into savings for harder illnesses should be put into ETFs or a long-term savings account. Since you most likely won’t be touching the savings for many years, the best option is to let them grow and enjoy the long-term savings benefits.
Money intended for the treatment of common illnesses and unexpected medical expenses should be put either in a short-term savings account or into a piggy bank. Since you most likely will use up the 20% portion of your health savings before a year ends, you don’t have to worry about money depreciating because of inflation.
Also, putting savings intended for everyday illnesses into an easily accessible place is very rational. When treating an everyday illness, to feel relief, you need medicine or medical products at the earliest convenience. Dealing with banks and investment companies when you need to buy tablets for your sore throat is the last thing on any sick person’s mind. So just leave the savings for harder illnesses at a difficult to access place, and savings for everyday problems at your piggy bank or a similar place.
Many countries have many different systems of health insurance. I recommend at least having the basic available level of insurance, since most of the times it is cheaper than being completely uninsured. And paying for every medical cost out of your own pocket. Medical costs aren’t cheap!
The best insurance option I have seen is accident insurance. Accident insurance isn’t very costly and covers a lot of possible medical traumas. Since no one can know when you’ll break a bone or get hit by a car, preparing for the worst is only logical.
Accident insurance is also helpful if you are the main breadwinner of your family. If you die at a moment when you have accident insurance, a sum will be paid out to the people in your will. This means, that your family won’t have such a hard time financially after your death.
It’s a weird world where readers have to be reminded that insurance fraud is illegal and can land you in prison. But, insurance companies have ways of figuring out fraudulent cases and since they are businesses, they will do all they can so that they don’t lose their money.
It may be tempting to not save money for the more common illnesses, especially at times when the person feels healthy. Spending that money on more entertaining pursuits because of the fear of missing out, is a common reason why people get hit hard financially by their healthcare costs.
Spending time, rather than money on preventative measures for your health is the easiest way to “supplement” your healthcare savings. Going on walks, growing your own lemons and tomatoes (high in vitamin C) and staying active requires only time, but not money. What’s even better, is that these simple measures will help you live a longer and a more healthy life. The elderly who were active in their youth and their middle age, cope with their advanced age a lot better than those who chose the sedentary lifestyle. Eating food high in vitamin C will help you to not get sick. And it will also save costs on store-bought synthetic vitamins.
Throwing it all away?
Suppose a person saves 5% of their savings for healthcare every month, frequently goes on long walks and has a full accident insurance. But the hypothetical person also loves to drink and smokes occasionally. Is saving money for healthcare in this case is rational, or is it more like throwing out the money without a good reason?
If you or your family members have harmful habits, the best saving for healthcare is getting rid of those habits. Smoking and alcohol drinking offers no benefits (the social benefit is a lie) and only destroys a person’s health irreparably over the years. If you need an expensive camp or a book to get rid of your unhealthy habits, do it.
It’s better both for your savings and your health to spend a bigger sum one time, than to deal with high healthcare costs all of your life.
Even if you are past middle age, saving for healthcare is never too late. Because sometimes it means the decision between loans and medical Kickstarter projects, and living with dignity and a sense of financial safety.
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