A thief stole your passport, and it’s not cheap to get a replacement. Your rental surfboard broke in half on a massive wave, and you’re liable for its market value. You have an impressively large hospital bill from a motorbike accident.

Travelers have to contend with these real situations. Do you know how to prepare for a financial emergency? If not, follow these 4 steps to turn a financial nightmare into a mere setback:

Prepare for a financial emergency with stacks of 100 dollar bills.
Andrew Pons
  • Build an Emergency Fund

    It’s incredibly important to have an emergency fund. Many personal finance writers have covered emergency funds in many different ways. However, people still travel without one.

    It’s easy to think that a financial emergency will not happen to you when you’ve been traveling for x amount of years, and everything’s been okay so far. That type of thinking is a fallacy.

    Just because things have been good so far, does not mean they will always remain so. An emergency fund is an 100% necessary step to prepare for a financial emergency.

    Running out of money while abroad can have much more serious consequences than it might back home. Whether you are a traditional traveler or a nomad will determine how much of an emergency fund you should have.

    Your travel emergency fund should be able to do the following things: replace the most expensive item you have that is necessary for your travels, purchase a last-minute plane ticket home, and cover costs incurred in an emergency situation.

    If you are a digital nomad, then your emergency fund is dual purpose. First of all, it needs to act as a travel emergency fund. Secondly, it should cover 3-6 months of living expenses in case of unemployment.

    Building an emergency fund can be daunting. To make it seem less scary, take small steps to begin stockpiling the cash you need.

    Start your emergency fund by opening a separate savings account with a high interest rate. Add to it with cash from a cash back credit card. Nerd Wallet offers reviews of high yield online savings accounts and cash back credit cards.

    Looking out over the wing of an airplane to the rising sun.
    Ross Parmly
  • Purchase Travel Insurance

    If a truly bad thing happens, like all of your possessions being burned in a fire, travel insurance will be your saving grace. You will not need to worry about replenishing your funds if you purchased travel insurance to prepare for a financial emergency.

    There are many things to consider when choosing the right travel insurance for you. Thankfully, this website has a lot of information and helps walk you through the process of choosing a travel insurance provider. The authors have included reviews of top providers.

    Read your insurance plan closely before you purchase it. Adventure sport injuries are almost always not covered. Drinking or drug related accidents are not covered. Motorbike accident coverage has strict guidelines.

    Check to see if your normal health insurance has international coverage. Five minutes of research is sometimes all it takes to help prepare for a financial emergency.

    Your credit card may have some form of travel coverage. Here’s a quick read about credit card travel insurance, with score reports for popular cards.

    An ATM machine
    Junior Libby
  • Have Multiple Ways to Access Money

    Break-ins happen. You’d planned out your budget for the next two weeks, and hidden the cash you needed carefully in your bungalow. Now your money is just… gone. Luckily, you had prepared for this! Your emergency fund can easily cover two weeks of expenses.

    Splitting cash between two locations is a quick way to prevent disaster. If thieves steal your money from one location, the cash in your second stash should have at least enough for transportation to the nearest ATM.

    My personal strategy is to keep part of my cash on my person, and part of my cash in my luggage and/or room. There are different products that can help keep the money that you carry with you safe.

    If you’re female, and want to carry a purse, go for a cross body strap. It’s much harder to snatch than a purse on your shoulder or in your hand. Men can utilize wallet chains. Fanny packs have had a make-over and are still one of the safest ways to carry cash.

    I carry two small padlocks when I travel to keep money that I leave in my room safe. One is to lock my backpack, and one is for lockers provided by the accommodation.

    If you attempt an overseas transaction, your bank account can be frozen. You should always place a travel alert on your account before you travel. Sometimes banks will freeze your bank account even if it has a travel alert.

    Never get down to your last bit of cash. Keep a few days of cash cushion in case your bank account is frozen or the ATMs go offline. If the problem is the bank account, it’s best to have two different bank accounts you can access.

    Having access to two bank accounts will allow you to withdraw more cash per day. If you need to hand over a lot of money, daily cash withdrawal limits can be a huge road block.

    A digital nomad types away on his laptop.
    Thomas Lefebvre
  • Have a Plan to Replenish Accounts

    Congratulations! You were able to prepare for your financial emergency by using the first three steps and made it through unscathed.

    Check HelpXWorkaway, and WWOOF to see if there is anything available in your current location if you are struggling to pay for accommodation after your financial set back. You’ll need to have a plan to add money back to your accounts. Find inspiration in our post on creative ways to make money while traveling.

    It takes planning and discipline to properly prepare for a financial emergency. Start with small goals, such as adding a certain amount to an emergency fund every month, or spending an hour researching travel insurance plans. Don’t let insufficient financial preparation cut your trip short. 

    Share your personal strategy on how to prepare for a financial emergency in the comments!

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    Anna Green

    I went to Bali with my family in 2013 without travel insurance. Unfortunately, my little daughter had a cold, which cost me over 1,000 dollars. I have to say travel insurance is critical for travelers.