An emergency fund allows you to weather financial difficulties from unforeseen events. Emergencies can take many forms, such as unexpected medical bills, car or home repairs, or other situations that require significant and sudden expenses. An emergency fund prevents you from relying too heavily on credit cards or taking on high-interest loans, which can put you in debt. Most importantly, it enables you to keep your savings for your children's education or future home untouched.
Many rely on one buffer source to cover unexpected medical emergencies, with health maintenance organizations (HMOs) commonly being the go-to option. However, HMO benefits can be limited. With the rising cost of healthcare here in the Philippines, it may be wise to consider having a fund dedicated to healthcare expenses.
Ways to Build an Emergency Health Fund
Saving specifically for future hospitalization means looking at potential medical expenses and setting up a budgeting strategy. Here are five ways to help you start.
1. Set a financial goal based on potential medical expenses.
Establish a specific target for your emergency fund. Calculate your monthly living expenses and aim for a fund that covers at least three to six months of these costs. Then, review the costs of these three items in your area:
ER and ICU
Costs from emergency room visits and confinement to ICUs can go up to hundreds of thousands. For example, the cost of emergency care in acute ischemic stroke ranges from PHP150,000 to PHP255,000 in private hospitals, according to the Stroke Society of the Philippines.
The Philippine Health Insurance Corporation (PhilHealth), the country's national health insurance system, only offers PHP76,000 for Filipinos who suffer ischemic stroke and PHP80,000 for those with hemorrhagic stroke.
Room and board
These cover sleeping accommodations and meals (not including medication and doctor's professional fees). In the Philippines, these can go as low as PHP200 for public hospital wards to upwards of PHP5,000 daily for private rooms.
Long-term care
If you have a chronic illness or disability that requires long-term care, such as recovering from a stroke, you may need to take more time off work than your sick leave will cover. The result can be a loss of income, especially if you are the main provider in your household.
It would help if you also considered factors like pre-existing conditions or family medical history that puts you at high risk of certain diseases. This information can help you make more informed decisions about your healthcare and budget accordingly.
2. Create a budget.
Establish a specific target for your emergency fund. Calculate your monthly living expenses and aim for a fund that covers at least three to six months of these costs. Then, review the costs of these three items in your area:
- 50% goes to your needs (food, housing, utility bills, insurance, etc.)
- 30% goes to your wants (dining out, shopping, recreation)
- 20% goes to your savings (emergency fund, retirement income)
3. Automate savings.
Set up automatic transfers to your emergency fund from your salary bank account. You can put savings in a high-yield savings account so your money can earn higher interest.
4. Take advantage of extra cash.
Put unexpected or additional money l ike tax refunds, work bonuses, and cash gifts into savings. These help grow your finances without affecting your regular budget. If you're generating extra income from freelancing, part-time work, or a side business, earmark these as savings.
5. Supplement your emergency fund with insurance.
You may need insurance that provides additional coverage for specific medical treatment to complement your financial safety net. Insurance products like AlA Med-Assist gives access to a wide range of accredited hospitals and doctors nationwide. It can help you with emergency in-patient hospitalization expenses, covering up to 90% of in-patient costs and can shoulder up to ₱4 million annually depending on the face amount of your policy. The plan can also pay a Daily Hospitalization Income of up to ₱3,000 for a year to help offset income loss. It .
AIA Med-Assist also comes with AIA Vitality wellness program, giving you a 20% coverage boost at the start of your policy. This coverage increases each year as you make healthy choices with AIA Vitality.
Staying Proactive with Your Health
Regularly review your budget and adjust your goals as needed. Life circ*mstances and financial situations change, so adapt accordingly. Building an emergency fund is a gradual process; consistently set aside money, no matter how small.
Regular check-ups, a healthy lifestyle, and proactive health management can help reduce the likelihood of hospitalization and associated costs. An emergency fund provides a sense of security, reduces stress, and helps prevent going into debt. Protecting your family against the unexpected doesn't have to be daunting, especially if you start early. Take that first step now and consult an AIA Life Planner or healthcare professional who can help you plan a solid safety net for your healthcare needs.
