We take good health for granted—until we get sick. Even a minor health crisis can affect your own and your family’s financial well-being through limiting your ability to earn or having additional expenditures:
- You may not be able to work
- Your caregivers may not be able to work
- You may need to hire extra help to keep up with housework and childcare
- You may need to buy prescription drugs, medical equipment and more
All of this could translate into you using your savings or borrowing money, which can compromise your future financial security. And, the impact is amplified if you get a critical illness or become permanently disabled.
You can minimize the financial effects of a health crisis with these four strategies.
1. Know what benefits you have and when to access them
You may be entitled to:
- Benefits through your workplace
- Benefits from individual critical illness insurance and disability insurance policies
- Canada Pension Plan Disability Benefits for yourself and your children
Tip: Check www.canadabenefits.gc.ca to see what other federal, provincial and territorial programs you can access.
2. Withdraw wisely
Not all withdrawals are created equal. In general:
- You don’t pay tax when you take money out of a Tax-Free Savings Account (TFSA) or bank account
- The government will withhold a portion for tax-purposes when you take money out of a Registered Retirement Savings Plan (RRSP)
- You may pay tax when you sell an investment to take money out of a non-registered account
Tip: Consider what investments will make sense for you if you ever need to make withdrawals to pay for costs related to unexpected illnesses or disability.
3. Borrow carefully
Debt can quickly spiral out of control—look for borrowing options with low interest rates and flexible repayment terms. Your choices may include:
- Secured line of credit (tied to your home)
- Unsecured line of credit
- Personal loan
Tip: Try to avoid using credit cards with high interest rates.
4. Prepare for the future
People with disabilities may be able to open a Registered Disability Savings Plan (RDSP) and access grants and bonds that can help them save for future financial needs. Also, depending on your eligibility, you may want to consider critical illness insurance and disability insurance to provide a source of money if you have a health crisis down the road.
Protecting your lifestyle and savings
You have financial choices before and during a health crisis and your best solution may include a mix of approaches.
Consider speaking with a financial advisor who can help you assess your options and make decisions that protect your lifestyle and your savings.