Not everyone has a head for money matters, but if you are planning to raise a family or if you already have children, then making sure that you have the wherewithal to deal with your financial needs, whether expected or unexpected, is of utmost importance.
One way of ensuring your family’s financial stability is by investing in these four important funds:
1. Health Insurance
If you have a modicum of good sense, you would readily appreciate why having health insurance coverage for your family is a must. In your past 20 or so years as a single individual, if you were ever hospitalized, you would know how hospital bills can easily spiral out of control. Thankfully, the health insurance your parents obtained for you or perhaps your workplace’s Health Maintenance Organization (HMO) probably covers much of these bills.
“Having medical coverage will already save [couples] a lot of money along the way, especially when medical emergencies happen or an illness comes to the family,” says Fitz Villafuerte, author of the financial blog Ready to Be Rich.
As a matter of fact, medical emergencies are among the primary reasons why people become bankrupt. You need only use your imagination to understand how this could happen. For instance, you get caught off guard by a serious illness or injury. Without health insurance coverage, you can still get medical help, but you will have to pay for all the costs on your own. Lucky you if you get better within a couple of days, but if you were to stay in the hospital for a fortnight, your bills can pile up easily.
Another reason why you should get a good health insurance is that insured people are more likely to seek medical help compared to their uninsured counterparts. The medical costs involved tend to discourage those uninsured from seeing their doctor when they are feeling sick. Such a choice would sometimes have terrible consequences, like when people begin seeking treatment for their ailment or injury only when it has already worsened.
For as little as ₱100 a month, you can already maintain a PhilHealth membership and be insured for a number of in-patient and out-patient medical services. Furthermore, various HMOs in the country also provide packages designed for either company-employed or self-employed individuals.
“I think that health insurance coverage should be a priority for couples. If any [one] of them or both are working, it's just as simple as updating their records to list each other and their kids as dependents,” says Villafuerte.
Coupled with a personal emergency fund, health insurance coverage for yourself, your spouse, and your kids can help all of you enjoy a better quality of life.
Click here to read more.
[previous|page|next]
2. Retirement Plans and Pensions
Filipinos are very family-oriented people, and sometimes, this works to our advantage. Sometimes though, it doesn’t. One of the hackneyed assumptions among Filipino families is that the children should support their parents when the latter grow old. Yes, from an emotional point-of-view, this makes absolute sense. We should be grateful for all the things our parents did for us, so in one way or another, we should support them in their retirement years.
The trouble begins, however, when people begin looking at their children as a substitute to a retirement plan. This should not be anyone’s philosophy. For instance, what happens when (for whatever reason) your child or children could not be around during your retirement years? What happens when, at the end of your long journey towards retirement, you realize you don’t have money of your own? Thus, you should look at things not only emotionally but also pragmatically.
“A retirement plan should be [a couple’s] next priority,” says Villafuerte. “I strongly believe that it's wrong for couples to expect their children to support them when they grow old.” Indeed, there’s no way to prognosticate what the future will bring, so it is wise to be prepared for your retirement.
Most public and private workplaces now offer retirement benefits managed by social insurance institutions. The Labor Code of the Philippines requires all employees in the country to be covered by retirement benefits provided by either the Government Service Insurance System (GSIS) or the Social Security System (SSS). Retirement benefits may come in the form of gratuities, lump sums, and monthly pensions. Take note that even self-employed individuals can be a member of the SSS.
Of course, there are other avenues to invest your money in for your retirement. “One can just go to a savings bank and ask for the wealth management officer to give them their retirement investment products. These are usually UITFs (Unit Investment Trust Funds), bonds and other paper assets,” advises Villafuerte.
In addition, the Philippine government is also preparing to implement the Personal Equity Retirement Account (PERA) Act of 2008, which will help Filipinos save for retirement via a retirement savings plan. Keep yourself posted on developments regarding this new law so that you can take advantage of its benefits.
Neglecting to plan for a major life change such as retirement is risky. Failing to plan for yours may force you to find work even beyond your retirement years just so you can support yourself. If not, the other grim choice would be to live in poverty. If you haven’t developed financial planning habits early on in your life, it is important to start doing so today; and more so if you are planning to tie the knot and raise kids in the near future.
Click here to read more.
[previous|page|next]
3. Life Insurance
Contemplating on one’s own mortality is hard for many people. But on the practical side, people also need to think: “what would happen if I pass away today? Will my family continue to have the resources to pay for the house or the rent? Can my spouse or my kids still enjoy the quality of life they have now?”
One way of ensuring that your family will be less financially burdened if such an unfortunate event happens is to get a life insurance.
Many Filipinos see life insurance as a means to pay for the burial expenses of the policyholder who passes away. Yes, this is partly true. A life insurance affords those who are left behind with readily-available funds to pay for the funeral expenses. However, life insurance is also about protecting your family from the effects of losing your contribution to the household income.
Depending on the plan, a life insurance policy could help those left behind in a number of ways, including paying off the deceased’s outstanding debts, paying for estate taxes, or establishing a fund that can be transferred to a trust created for the benefit of the insured’s beneficiaries.
If you have a family but have not yet acquired a life insurance, then it is time to change tack. However, Villafuerte advises couples to prioritize having investments on paper assets first before buying life insurance and pension plans because they are easier to liquidate when financial emergencies happen to the family.
“The key here is to diversify your savings and not put all of them in solely paying for insurance premiums,” says Villafuerte. “Also, buy life insurance that pays dividends or those which pay out a part of your premium on a set number of years. That way, you will be able to get back your money if you've successfully avoided death,” he adds.
Click here to read more.
[previous|page|next]
4. Educational Plan
Most Filipinos still believe that good education is the best legacy they can leave their children. And why not? After all, in today’s unpredictable global economic environment, those who have a college degree still have far greater chances at landing a job and enjoying a steady income.
In the Philippines, there are many institutions offering educational plans. Such plans will often be tailor-fit to the needs of the payer and the child, and provide some amount of protection if the parent passes away or becomes incapacitated.
In recent years, however, many Filipinos have become caught up in the fallout that came as a result of the bankruptcy of many educational plan companies. Who could forget the College Assurance Plan (CAP) fiasco a few years ago? Many parents pooled hefty sums of money into educational plan companies like CAP, hoping to be able to pay their children’s tuition fees a few years later. Instead, the investments yielded much lower returns than the parents had expected, and some of them even saw their investments almost literally evaporate into thin air. Furthermore, school tuition fees continued to skyrocket, especially when the law requiring schools not to increase tuition fees for more than 10 percent per annum was abrogated.
Such a scenario is difficult to forget and more so because it is happening not only to educational plan companies but also to other pre-need plan providers. This is why it is important to countercheck your calculations and determine if what these products offer you is really consistent with your goals. For instance, check if variables like tuition fee increases really stack up against the return on your educational plan.
Conversely, people who choose not to invest in particular pre-need products may also look into other ways to pay for their future financial needs. Examples are investing in mutual funds and UITFs, including money market funds and bond funds. It’s important to do your research according to what your needs are, and you can always consult with a financial planner if you have to.
Photo from sxc.hu
Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod
Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod
