Wednesday, August 6, 2008

When to spend, when to save.. A young woman's guide

Managing your money is important at every age and the earlier you start, the better off you’ll be in the long run. This three-part series is intended to give young women starting out in the work force a simple guide for prioritizing spending. Consistent with WISER’s values and mission, but geared towards younger women, here are three major financial priorities that will put you on a steady track to a secure retirement: investing in your health, paying off debt, and saving for retirement.


Priority #1: Your Health

Invest in your health with a catastrophic coverage plan

If you’re young and “invincible” you’re not alone: people age 23 to 30 are the group most likely to lack health insurance. Twenty-somethings are likely to go a few years uninsured because of a combination of factors:

  • they have aged out of their parents’ coverage,
  • they no longer qualify for a school-sponsored health care plan when they graduate from or leave college,
  • they have not yet settled into a “real world job” that offers employee benefits like health insurance
Combine these four factors with relatively low-income employment, a desire to pay off student loan debt, and a youthful and generally healthy body and you have a recipe for being uninsured and, therefore, being vulnerable to health emergencies that could cripple your economic future before you’ve even gotten started!

What can you do? To avoid this potential disaster, make the decision to trade some of your purchasing power now for long-term peace of mind with a high deductible health plan (HDHP), also called a catastrophic or emergency health insurance plan. HDHPs are health insurance plans that require you to pay a much higher deductible (around $5000 a year) before the insurance company begins paying towards your medical expenses, but also charges a significantly lower monthly premium (for non-smoking females, around $50 a month) than traditional “complete coverage” plans with lower deductibles. The HDHP option is best suited to women that are generally healthy, have no chronic conditions, and are mainly seeking a “safety net” in case of an expensive accident or unforeseen medical emergency.

You can compare these and other kinds of health insurance policies for free online by clicking here to visit ehealthinsurance.com.

5 comments:

Anonymous said...

hey, great post! will this series be up every week?

Hillary said...

Thanks -- there are, indeed, several more installments coming so keep checking back!

Anonymous said...

As a recently graduated, healthy 23 year old female settling into her first real world job (of which doesn’t offer health benefits) I, too, felt that I didn’t need to worry about health insurance. There simply isn’t any extra income with city rent and student loan payments on my entry-level salary. However, I don’t necessarily agree that an HDHP is the best option. About a month ago I found out that I have HPV and the doctor told me a statistic that nearly 70% of the northeast population of the United States also has it. Since young women are probably likely to be sexually active it’s important for that segment of the population to also be insured to cover extra yearly gynecological visits, prescriptions, and surgical procedures (approximately $4,000-$5,000) sometimes associated with this disease. And, of course, now that I’m diagnosed I can’t get coverage after the fact. As I’m about to max out my credit cards paying out of pocket I wish someone might have recommended getting coverage with a low deductible that would have saved me from this as well as the possibility of something more expensive.

Lindsay said...

thanks for the link to ehealthinsurance.com-- affording health insurance is one thing, but finding it is another.

Hillary said...

Wow, anonymous, thanks for the thoughtful comment -- you bring up a number of important points.

Your (unfortunate) situation is an excellent illustration of the perils of being young and uninsured -- you're going along in life, eating healthy, taking your vitamins, having protected sex, and thinking that's enough, but it's not. You're not alone in being blind-sided by an expensive diagnosis, especially HPV, which is an incredibly common medical condition among young men and women today.

And I think you're right to point out that HDHPs are not always a great option -- if you have a HDHP and then need a $5000 surgery, you'll probably pay for it all out-of-pocket anyway (i.e. on the credit card), since the high deductible is how the HDHPs are able to offer low monthly premiums. Generally, HDHPs don't cover prescriptions - just hospital stays and doctor's bills - so you'd be on your own for those expenses, too.

The bottom line is that health insurance is expensive any way you slice it, but WISER's position is that being insured against an expensive catastrophe (like getting hit by a bus) is better than nothing at all.