By Essie Bester
When one is still young, it feels as if you have limitless time and energy at your disposal. Illness and death are things you seldom think of. However, experts warn against this.
Apart from joining a medical and pension fund (which often form part of an employer’s remuneration package), young working people tend to postpone further financial planning for when they are older.
” Truth is that it would be to young people’s benefit to start providing for the future as early as possible,” says Danelle van Heerde, head of advice instruments and processes at Sanlam.
She shares her proposals on important financial decisions you should consider when you are young:
- Draw up a will and take out life insurance
According to Danelle these are two critical financial considerations that young people often put off until later, perhaps because it confronts us with our own mortality ─ something that one would rather not think about while still young. The reality of life, however, tells a different story. Regarding a will as an unnecessary administrative exercise or postponing taking out life insurance until later can cost you dearly.
Anybody who owns assets or has debt (regardless of the amount) must have a will. If you die without a will you have no say in how your assets are to be divided or how your debt (if you have a car or any property) is to be managed.
Dying without life insurance could mean that your family will struggle financially, especially if you are the breadwinner and there are children to be taken care of. Life cover taken out at a younger age means lower premiums and fewer exclusions, says Danelle.
- Take out income protection
Young people in their twenties or early thirties often get a feeling of invincibility. And yet, it is exactly then that they should seriously consider income protection, Danelle warns. “The single greatest risk for any young working person, is the inability to earn an income.”
What are you going to do if at the age of 25, with more than 40 years of work ahead, you become permanently disabled and suddenly cannot earn an income? Add study loans, any other debt, your marriage and children to the scenario, and the importance of taking out cover to protect your income becomes clear.
If you have sufficient cover and lose the ability to earn an income, your benefits automatically take effect and you get a monthly amount or a lump sum that will allow you to focus on your physical and emotional wellbeing.
- Make sure that you have the necessary cover against illness
It is equally important that you, as a young person, are covered in the event of your becoming seriously ill and unable to work for some time. If you look at the many serious diseases and know, for instance, that you have a family history of cancer, it is worth its while to invest in adequate sick cover.