What is Risk?
01.Expecting the Unexpected
Risk is the chance that something bad or unexpected might happen. You could ride your bike and get a flat tire. A storm could damage your house. You could get sick. In the money world, risk means the chance of losing your savings due to bad events.
02.Managing Risk
We manage risk in four ways: avoiding it (not doing dangerous things), reducing it (wearing a helmet on a bike), accepting it (knowing a flat tire costs $5 to fix), or transferring it (getting insurance). Let's see how transferring risk works!
03.The Financial Safety Net
Managing risk keeps a sudden accident from destroying a family's financial plan. It's like putting a safety net under a tightrope walker.