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1 October 2014
It also found that the events felt most severely – both financially and emotionally – were financial events such as loss of savings, a business closure or a retrenchment. And it further showed that most people were not well prepared financially for these events.
Here are some respondents’ experiences:
So with the likelihood of something big and unexpected coming your way over the course of your lifetime, what can you do to mitigate the financial and emotional impact of these events? Karin Muller, head of Growth Market Solutions at Sanlam, suggests these five steps as good starting points:
This should be equal to between three and six months of your monthly salary. Remember that you need to access it quickly so an investment such as a money market account is appropriate. This will not solve all your problems, but it will provide a healthy cushion in an emergency.
Work with a professional financial adviser to draw up a holistic financial plan for your life – in the short, medium and longterm. As part of this process, think through some of the most financially impactful events which you may face – such as loss of income through illness, retrenchment or loss of a loved one who is a breadwinner – and factor these into your planning so if they happen the financial impact is mitigated and in the process, the emotional impact is too.
This forms part of the financial planning, but is worth talking about separately. Risk cover is designed specifically to help you provide financially from life’s unexpected events. Included in this category of insurance products are life cover, disability cover, severe illness and providing an income if you are unable to work due to sickness, disability or injury. Being able to ensure that your financial needs are covered if a big event takes place is not only essential for your own future wellbeing, it will also protect your family from having to step in and assist if you were not prepared.
Unfortunately many people see saving, for instance for retirement, as a grudge purchase when in fact it is a process which actively builds up assets and can contribute measurably to your lifestyle and financial position. Making the right provisions to save is another way that the effects of life’s unexpected events can be mitigated and it can also help you avoid becoming a burden on your loved ones.
A will protects your family from the fall-out of a big life event. Your will should clearly state what your wishes are so that your family is not placed in a difficult financial position when you are no longer here.