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Here you are. Eventually with some money to channel towards responsibility. The question is: Do I invest in savings, pension or life insurance with your first step towards being a “grown-up”? And by grown –up, we mean financially grown-up. Financial priorities are personal, but if you are neither a trust fund kid nor a lotto winner, the following should be your order of priorities;
WHY MUST I PRIORITISE LIFE INSURANCE TO SAVINGS AND INVESTMENTS?
Why should I pay for something I might never use like life insurance?
You can be 28 years old and just started a life insurance policy. At the same time you started saving for your retirement. 6 Months later you are diagnosed with some disease or you find your car (and your body) wrapped around a tree. The life insurance (life cover, dread disease or income protection) policy will pay the insured amount (R1mil or R5 mil or whatever you chose even though you only contributed premiums for 6 months). The savings plan will pay whatever you saved in 6 months.
Let’s hope you never get into a situation where you will need your life insurance to pay out. BUT, if and when you need it and you don’t have it….it is like not having a parachute when you need it….you are done. And so are those that need to take care of you and can’t afford it. Depressing thoughts but true….and it doesn’t need to be….THAT IS THE POINT!
When you are young and healthy, life insurance (life cover, dread disease, income protection, capitol disability etc.) is very affordable. The older you get and the more your health deteriorates, the more expensive it becomes. The point is, get the life insurance when you are young and healthy. When you are older and not as fit and healthy, it is way more expensive.
The best way to go about plotting your financial map, is to make use of a Certified Financial Planner.
- A CFP (Certified Financial Planner) has a post graduate diploma in financial planning and is certified by the Financial Planning Institute of South Africa-an international organization.
- These CFP’s have to adhere to international financial planning standards and has to maintain a certain amount of continuous education each year.
- The most ideal way to know what you should plan and save for is via a proper financial plan.
- A financial plan takes everything into account (your income, assets, expenses, existing insurance and savings / investments, debt and company benefits [pension, group life and disability], family situation as well as your financial goals.)
- It is often impossible to guess or estimate how much you should invest and where the money that you can afford should go to. This is where a financial plan makes the difference. Someone who just wants to sell you a policy, is someone to be avoided.
- A professional has to adhere to a code of conduct, who is audited by the regulatory authorities and someone who is being held accountable for the advice they give.
- Get advice from someone that is totally independent. In other words, they are not bound to one or two insurance companies, but are contracted with all or most of the major insurance- and investment companies. This way they can source the best solution for you without being bias to a specific insurance company or investment company that does not truly represent your best interests.