“As a parent of two young kids, I'm increasingly worried about our financial security in case something unexpected happens. Can you provide guidance on how to financially protect my family in such events, ensuring we have a safety net?"
-Question from Saskia in Leichhardt, NSW
Top answer provided by:
Renee Hush
Hi Saski,
Thank you so much for your question.
Having a safety net is always a good idea. This will come in a few different forms and your own personal circumstances will determine the level of safety net/s you need. I think the main areas you need to look at are:
1. General Insurance
2. Life insurance
3. Emergency funds
4. Savings
5. Estate Planning
Here is some basic information on these things.
General Insurance
General insurance covers your assets and possessions and health and includes cover such as health cover – hospital and extras, car insurance, home and contents, or pet insurance.
Having these covers in places ensures that should something happen to one of these, you have some insurance to cover the loss or costs associated with this. You should review this in detail and check you have sufficient coverage.
Life Insurance
The first would be insurance, if the worst case scenario occurs you want to have your family protected. You and your partner (if applicable) should consider the following:
Life insurance – in the case of the death a lump sum is paid out to your family. This usually covers things such as:
-Repayment of debt
-Funeral expenses
-Income replacement for the surviving spouse or children
-Children's education expenses
-Bequeaths, etc.
TPD insurance – provides a lump sum in the event you are totally and permanently disabled and unable to return to work. This usually covers things such as:
-Repayment of debt
-Medical expenses and home improvements
-Tax provision
-Income replacement
-Children's education expenses
-Carer costs, etc.
Income Protection – provides a monthly benefit (after a waiting period) should you be unable to work due to illness or injury. This is usually between 60-75% of your current salary.
Trauma cover – insurance paid as a lump sum should you be diagnosed with one of the traumatic conditions such as heart attack, cancer, stroke and many more.
You may already have some cover in your super, but it is important to review this and ensure you cover everything that is required. There are a number of ways to pay for this cover. Speak to a Financial Planner for a full review and to discuss the costs and your options to pay.
Emergency funds – having access to a lump sum of money for emergencies is important. How much you need depends on your individual requirements.
This may be cash in the bank, redraw on your mortgage, a credit card or a savings account. If you don’t already have one, start a regular savings plan to build this up.
Education Savings – with two young children you need to consider education costs and whether you can afford to pay the future costs of your income or whether you need to start saving. There are some really good options for saving for children or specifically children’s education.
Looking at a regular savings plan will help you manage these costs.
Estate Planning – this is not a nice thing to think about, but you should also contact a Solicitor or Estate Planning specialist to put in place a range of things including Wills, Powers of Attorney and Guardianship. With two young children you need to consider who will look after your children if you are not here and how they will manage the costs associated with this.
As always, you should seek the advice of a Qualified Financial Planner who can help you with almost all of these things. They can sit down with you and go over your individual circumstances and needs and review what you already have in place.
I hope this helps.
Renee
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
Article by:
Comments0