April is National Financial Literacy Month – a time dedicated to equipping individuals and families with the knowledge and skills to make informed financial decisions. In honor of this initiative, we spoke with Brock Long, Hagerty’s Executive Chairman and former Administrator of the Federal Emergency Management Agency (FEMA), about the role of financial literacy in emergency management as well as the steps individuals can take to financially prepare for potential disasters.
Why Financial Literacy is Crucial for Disaster Readiness
Effective disaster preparedness goes well beyond traditional steps like building an emergency kit, learning evacuation routes, or installing a generator. Establishing a strong foundation of personal financial resiliency is also a key pillar of comprehensive disaster preparedness. As Brock explains,
“Financial resiliency, breaking negative cycles with money, and access to free financial education are integral parts of the foundation that helps people be ready for disasters.”
Throughout his career, Brock has witnessed firsthand the long-term financial toll disasters can take on individuals and families. One major barrier to building financial resilience, he notes, is asset poverty — the lack of financial assets beyond immediate income, such as savings, that can sustain basic household needs for at least three months. “When households are dealing with asset poverty, it puts them in a vulnerable position when medical emergencies or disasters strike,” he says.
Ultimately, understanding basic financial principles like budgeting, managing debt, and establishing an emergency fund can make the difference between a swift recovery and prolonged financial hardship after disasters. Among the most important — yet often overlooked — components of financial preparedness is insurance.
The Role of Insurance in Financial Resilience
Drawing from his professional experience and insights from the Urban Institute’s report, “Insult to Injury: Natural Disasters and Residents’ Financial Health,” Brock cautions households against cutting corners on insurance. “Insurance is not a place you ever want to cut back on,” he says.
“If you have the means to obtain insurance for your possessions, that is not an area where you want to save money. Insurance is the first line of defense when it comes to helping you recover from major disaster experiences.”
Ultimately, disasters can occur anywhere, and insurance plays a pivotal role in financial resilience and long-term recovery after disasters. To iterate this point, Brock points to flooding as a commonly underestimated risk. Cities with outdated infrastructure or rapid urban growth can see major changes in flood zones, often without updated floodplain maps. Because of these unpredictable risks, he emphasizes that proper insurance coverage should be a top priority for financial preparedness planning. “Only once you are properly insured, then go buy the emergency supplies, then go buy the generators,” he states.
Bridging the Financial Education Gap
Brock also recognizes that many individuals face financial barriers, particularly when it comes to obtaining insurance or building financial resilience. For some, the high cost of premiums, the complexity of policies, and the perception that insurance is an unnecessary expense can make it seem nonessential. Currently, only 27 states require students to take a stand-alone personal finance course to graduate from high school, highlighting a significant gap in early financial education. While acknowledging these challenges, he believes that promoting financial education and supporting access to affordable insurance options can help break down these barriers, enabling individuals to better mitigate risks and reduce the financial burdens of unexpected events. As he puts it,
“The first step in creating a culture of preparedness in America is helping people break negative cycles with money – helping people learn how to budget, save for retirement, and understand the purpose of insurance.”
During his time as FEMA Administrator, Brock made financial resiliency a central component of the agency’s strategic plan. To support this, he invited John Hope Bryant, Founder and Chief Executive Officer (CEO) of Operation HOPE, to speak with FEMA staff. Operation HOPE offers financial literacy and economic empowerment programs to both youth and adults across the country, including free financial counseling.
Brock emphasizes that providing people with tangible financial skills is essential for increasing overall financial preparedness. These skills empower individuals to manage emergencies, reduce reliance on aid, and recover more quickly, ultimately enhancing both personal resilience and community recovery efforts.
“How do we get agencies, financial institutions, wealth advisors, and others to be proactive on blue-sky days, providing free financial counseling? How do we expand the reach of volunteerism to help people break free from negative financial cycles?”
According to Brock, these are important considerations for enhancing preparedness and reducing vulnerabilities to disasters nationwide.
Practical Tips for Strengthening Financial Resilience
Brock’s insights underscore that building financial resilience is an ongoing, proactive process. As individuals work to improve their financial preparedness, he offers several key pieces of advice:
- Reduce Your Debt: The less debt you carry, the more financial flexibility you will have in an emergency.
- Save for the Unexpected: Aim to build an emergency fund that covers at least three months of expenses.
- Consult a Financial Expert: Seek guidance from a financial professional to better understand your options and strategies.
- Understand Your Retirement Options: If you have access to a 401(k) or other retirement plans, take time to educate yourself on how these can contribute to your long-term stability.
“Seek real knowledge,” Brock advises. Understanding your finances is not just about protecting yourself today, it is about building the foundation for your financial future and being prepared for whatever challenges come your way.
In conclusion, achieving financial resilience requires a collective effort. Agencies, financial institutions, and individuals must collaborate to provide the necessary tools, knowledge, and support needed to foster lasting resilience. Through proactive financial education, we can overcome negative cycles and empower communities to effectively respond to future disasters.
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