For most people, growing their wealth is their main financial goal. We want to have more money so that we can care for our loved ones, provide for their needs and desires, and give them the financial resources to live their best lives.
But while you’re focusing on growth, do you already have protection measures in place to preserve your financial standing? Arguably, being prepared for the unpredictable is just as important as having a growth approach to your money.
Here are five things you can do today to protect your family’s financial future.
Grow your emergency fund
Your first line of defense when it comes to your family’s financial future is your emergency fund.
What if something unexpected were to happen tomorrow which required a major financial injection? Would you and your family struggle? Or are you prepared to handle any unforeseen large expenses?
Having enough emergency savings means not having to scramble for money or go into debt, should something unpredictable happen to you or your loved ones.
Firstly, your emergency fund should be liquid and easily accessible in times of need. This usually means that it should be in the form of savings in an accessible bank account instead of locked up in investments or other illiquid financial instruments.
Secondly, you must have enough of it. What that means will vary from person to person and family to family. Three to six months of your monthly salary is considered a healthy amount, but you may want to have an even bigger cushion of six months to one year of your income.
At the end of the day, you are the best person to make the call on what amount of emergency savings is required for you and your loved ones.
Thirdly, your emergency fund should ideally be separate from your other short-term and long-term savings. As the name suggests, your emergency fund is intended for emergencies and unforeseen incidents whereas your savings should be for your other financial goals.
It may sound overwhelming to have to build such a sizeable emergency fund, especially if you already have many expenses and are operating on a tight budget.
If you don’t already have an emergency fund, today’s the day to start one. And if you do have one, it’s time to review if what you have is enough and consider how you can grow it. Are you able to funnel more money into your emergency fund during the next six to twelve months?
The healthier your emergency fund is, the better you and your family can weather any unexpected short-term financial storms.
Review your life insurance coverage
Have you ever considered how your loved ones will cope after your death?
It may seem like a macabre idea to contemplate, but it is a practical consideration particularly if:
- You are the sole breadwinner of your family
- You have dependents such as young children or elderly parents to care for
- You have outstanding liabilities such as a home loan, car loan, or other financial obligations
Your savings and assets, such as your home, may help provide financially for your family, should you suffer from an untimely death. But it’s very likely that they will not provide full financial security.
That’s why getting sufficient life insurance coverage is so important.
Life insurance can help cover the shortfall between your assets and liabilities, as well as provide an income for your loved ones after your death.
Life insurance plans come in two general types: term life insurance and whole life insurance. For pure insurance protection and a budget-friendly price tag, it’s worth taking a look at term life insurance. Whole life insurance can offer you a savings element on top of death coverage.
Aside from having coverage purely for death, you may also want to consider other types of coverage that can provide further financial protection for your family.For instance, at SingLife, you can add on riders to your term life plan to extend your life insurance coverage. The Critical Illness Cover provides financial protection against major critical illnesses such as cancer, stroke, and heart attack. The Disability Cover, on the other hand, will provide you and your beneficiaries with a lump sum payment if you become disabled and are unable to earn an income.
Not sure where to start when it comes to life insurance coverage? Check out our guide to calculating how much coverage you need.
Protect your home
Everyone needs a roof over their head, and according to SingStat 91% of resident households own the home they live in.
But have you considered what could happen if you or your partner suffer from an unexpected death, leaving your dependents without financial resources to pay off the mortgage?
Or what if your home gets damaged by unexpected incidents such as fire, water damage from malfunctioning water pipes or tanks, or gas explosions?
Your home is an important asset for your family, and it’s crucial that you protect it.
There are two types of insurance that can help in this case. One is home insurance, which is meant to cover the financial loss associated with any damage or loss of contents due to unforeseen circumstances.
The second type of insurance to consider is mortgage protection insurance. Such a plan is intended to cover the remainder of your mortgage, should you die or suffer from total permanent disability before the loan is completely paid off.
This ensures that you and your family don’t lose your home if you’re unable to make your mortgage payments.
If you own a HDB flat and are making your mortgage payments via your CPF, you are automatically covered under the Home Protection Scheme (HPS), which is a mortgage-reducing insurance plan.
However, HPS does not extend to homeowners of private residential properties and as such, you’ll have to find your own mortgage insurance.
Invest in yourself
As you enter the life stage wherein you start bringing up your children, daily life often segues into a routine. While family is undoubtedly a place where we feel comfort and love, don’t let your role as a leader in your family leave you stuck in your comfort zone.
There’s nothing wrong with security and stability, but don’t let that limit your ambitions and potential for professional growth. Keep investing in yourself because developing your skills and gaining more knowledge will be to your own benefit.
Not only will upgrading yourself mean that you can ensure you remain employable, you could even position yourself as an expert in your field. Or you could learn skills that allow you to build your own business on the side.
Investing in yourself means that you remain professionally valuable, and as such, you can continue to financially provide for your loved ones by growing your income. Consider maximising any learning or training opportunities available at your workplace, and seek out other avenues and areas you’d like to improve in.
If you haven’t yet used your Skills Future funds, now is perhaps the best time to look into a course that can help in your self-development.
Get started on estate planning
The term “estate planning” may sound intimidating, but it is an essential aspect of caring for your family’s finances in the future when you’re not around. Most families don’t like the idea of talking about death but figuring out these logistical and administrative matters now will give both you and your loved one’s peace of mind.
Essentially, estate planning involves creating a will.
You may opt to have a living will, which will outline how your family will handle your care in the event that you are unable to make your own decisions. You may also choose to appoint a power of attorney which would give an individual the legal right to make decisions on your behalf.
A will can also help direct how your assets will be divided after your death. Who receives your monetary wealth, and in what proportions? Who will inherit your home, other properties, and valuables? Who will take guardianship of your children, should you die while they are still minors?
Your will can address some of these basic considerations, but you can also be as detailed as you like. It’s recommended that you seek legal help to craft your will, particularly if the distribution of assets is not straightforward.
In Singapore, if you die without a will, Singapore’s Intestate Succession Act will determine how your assets will be distributed. So, if you’d like to get full control of how your family will benefit from your assets after your death, estate planning is crucial.
How many of the five things on this list are already taken care of? Get started on the rest and secure your family’s financial future and happiness!