Protecting a Household From Major Risks
Build progressive financial capability through protecting a household from major risks, moving from understanding to confident application.
5
Lessons in this module
Build the Right Emergency Fund
An emergency fund of three to six months' essential expenses must be liquid and held separately from investments, because its job is to be available instantly at a known value when income or plans are disrupted.
Insure Catastrophic Risks
For a sole earner with dependants, death or incapacity stops the household's income immediately. Life and income protection insurance cost a fraction of that exposure, which is why the premium is almost always smaller than the uninsured risk.
Avoid Paying to Insure Small Losses
Evaluate whether an extended warranty makes financial sense by comparing the premium to the item's replacement cost and the household's ability to self-insure from existing emergency savings.
Review Legal and Financial Documents
A will directs how assets pass on death and a power of attorney lets a trusted person act if the holder is incapacitated. Without them, the law decides and the family faces delay, cost, and outcomes that may not match the holder's wishes.
Create a Family Contingency Plan
Create a household contingency plan that specifies the financial response to redundancy, illness, and major unexpected expenses — using a structure prepared in advance so decisions can be made calmly when the event occurs.
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