How Accidents can affect Finances

We know that many people are involved in accidents or become incapacitated, and this changes their life suddenly, unexpectedly and drastically. Or they die. Or, most commonly, they reach an old age. People are not aware of them, especially successful young people that during that time substitute an older person at their jobs. In a somewhat short period of time, they will be substituted by other young successful people and this could be bad for the unprepared.

-          A few days ago – said Louis – some of my classmates were chatting and one of them said that shopping is an antidepressant.

-          Well, if you really care for her – said Mom – try and make her understand the importance of saving enough, because when she reaches certain age and is not accepted in any job, she will be very depressed and she will have a lot of free time and she will need to go shopping very often. Show her the statistics that show that 97 percent of retired people don’t have enough resources to cover their most basic needs, and 87 percent die without protecting their families financially. And please tell her that I say that the experience of being older can be wonderful, as long as you don’t add being poor to that experience.

-          Many institutions – added Dad – including retail stores, provide immediate or anticipated compensation, since they hand out credit cards with minimum requirements. These, when well used, are excellent instruments, however if not used properly, can be catastrophic for a financial situation.

-          What do you mean by well used? – asked Louis, who by the way had just applied for a credit card.

-          I mean that is convenient to use them to perform essential shopping – said Mom – that way you don’t have to contribute money, especially during these times of insecurity. But some people use them to seize bargains, and when you just sign away with no control, it’s easy to lose track of what you spend and you build up a debt that, if you don’t pay within the agreed period, you will face high interest.

-          Speaking of compensation in advance, do you remember what Uncle Steve told us? – Louis pointed out.

-          Do you mean your Joan’s husband? The duck, right? – asked Mr. Smith

-          Yes, he told us that when he came to The USA he got out of control, since he came with the notion that we were a third world country. However, he found that, while in Europe there was a lot of poverty, here we all had a house, a car, a fridge, everything we needed. Until a family member pointed out that everything we had was actually not paid for yet.

-          Let’s compare – said Dad – the yield provided by saving with the interest charged by a debt:

    SAVING            DEBT

    6% annual          3.5% per month or 42% annual