Financial Literacy and Disaster Recovery. How are they Related and What can we do Better?
Written by Brianna Lentz
Since 2003, April has been recognized as National Financial Literacy Month. Its objective is to raise public awareness on the importance of financial literacy and smart money management strategies. Financial literacy plays a critical role in the disaster recovery of individuals impacted by disasters. While low-income individuals are included in access and functional need (AFN) definitions, the role of an emergency manager in relation to low-income individuals and the financial literacy of their community is not clear. Therefore, it is important to bring attention to how financial literacy impacts disaster preparedness and recovery.
Financial literacy and disaster preparedness are closely related concepts because financially literacy can help individuals prepare for disasters. Below are some ways financial literacy helps with disaster preparedness:
Emergency funds: Financially literate individuals know the importance of having an emergency fund. This fund can be used for unexpected expenses such as home repair, loss of income, or evacuation fees.
Insurance: Understanding the various options available and having appropriate coverage can help individuals protect their assets in the event of a disaster.
Budgeting: Financial Literacy includes knowing how to create and stick to a budget. A budget can help individuals save money that can be used for disaster preparation. Examples include purchasing emergency supplies or reinforcing their home.
Financial planning: Financially literate individuals have a financial plan in place that includes long-term goals like saving for retirement. Having a financial plan can help individuals stay focused on their goals even during a disaster, which can provide a sense of stability and security.
Financial literacy can help individuals by providing a solid financial foundation that is resilient to unexpected events.
Financial literacy also plays a crucial role in disaster recovery by helping individuals and communities navigate the financial challenges that arise in the aftermath of a disaster. Below are some ways financial literacy supports disaster recovery efforts:
Understanding insurance: Financially literate individuals understand the importance of insurance and how to navigate the claims process. They are more likely to have appropriate insurance coverage and know how to work with insurance companies to get the compensation they are entitled to.
Accessing resources: Financially literate individuals are better equipped to access financial resources. These resources include disaster relief funds, loans, and grants. They know where to look for assistance and how to apply for financial support.
Managing finances: Financially literate individuals know to manage their finances during a crisis. They can prioritize expenses, cut back on non-essential spending, and make the most of their available resources. They are less likely to fall into debt or financial hardship because of a disaster.
Making informed decisions: Financially literate individuals are better equipped to make informed financial decisions in the wake a disaster. They can evaluate their options, weigh the costs and benefits, and choose the best course of action for their situation.
Rebuilding assets: Financially literate individuals understand the importance of rebuilding assets, such as homes and businesses, after a disaster. They can develop a financial plan for rebuilding and make informed decisions about how to allocate their resources.
Financial literacy is a critical component of disaster recovery efforts. It can help individuals and communities overcome financial challenges, access resources, and rebuild their lives after a disaster.
Emergency managers have an important role in promoting financial literacy as part of disaster preparedness and recovery. Here are some ways emergency managers can support financial literacy in their community:
Education and outreach: Emergency managers can provide education and outreach to community members about the importance of financial literacy. This can include workshops, seminars, and other forms of community engagement to help individuals and families prepare for and recover from disasters.
Access to resources: Emergency managers can provide information and resources to help individuals and families improve their financial literacy. This may include access to financial planning tools, budgeting templates, and other resources to help people manage their finances more effectively.
Partnerships with financial institutions: Emergency managers can partner with local financial institutions to provide financial education and support to community members. This may include offering financial planning workshops or counseling services to help people better understand their finances and prepare for disasters.
Collaborate with other agencies: Emergency managers can work with agencies such as FEMA to provide financial assistance to individuals and communities affected by disasters. This can include helping individuals access disaster relief funds and loans important to an individual’s financial recovery.
Plan for financial recovery: Emergency managers can incorporate financial recovery planning into their disaster response efforts. This can include developing strategies for rebuilding assets such as homes and businesses, providing support for individuals and families who are struggling financially in the wake of a disaster.
Emergency managers can play a critical role in promoting financial literacy by helping individuals and communities prepare for and recover from disasters. By providing education, resources, and support, emergency managers can help people build financial resilience and protect themselves from the financial impact of disasters. Many of the recommendations simply require a change in mindset as many of these strategies are already being used by emergency managers to improve disaster preparedness in communities. By simply bringing a financial literacy mindset to your education, outreach, and planning approaches, emergency managers can change how their community plans for and recovers from disasters.
