How much are you worth to your loved ones?

    August 13, 2014

    It is always a very good time to highlight the financial role that women play in their families. And you should ask a question: how much are you worth or not? Whether they are the breadwinner, or contribute equally to the household, don’t underestimate the value the woman provides.

    In fact, many couples don’t fully realise just how reliant they become on each other financially. They fall into an almost false sense of ‘financial security’. However, you should ask what would happen if a household that shares salaries suddenly lost one income?

    How much are you worth?

    The truth is that many people don’t factor this into their financial planning, and are often caught short when life does throw a curve ball.

    Let’s look at a practical example of how an average family of four can become largely dependent on a combined incomeHow much are you worth to your loved ones contribution.

    For the purpose of this experiment, we have two middle-to-upper income earners and two dependants under 7 years old. In this household, the mother brings in around R30 000 per month and the father brings in another R20 000.

     

     

    Female income per month:

    R 30 000

     

    Male income per month:

    R 20 000

     

    Total income:

    R 50 000

     

    Groceries

     

    R 5 000

    School fees for 2 children

     

    R 5 000

    Vehicle 1

     

    R 6 000

    Vehicle 2

     

    R 3 500

    Bond – R1million1

     

    R 9 000

    Municipal accounts

     

    R 4 000

    Short-term insurance2

     

    R 3 500

    Retail accounts

     

    R 2 000

    Landline

     

    R 500

    Cellphones x2

     

    R 1 000

    DSTV3

     

    R 740

    Fuel

     

    R 3 000

    Entertainment

     

    R 3 000

    Total

     

    R 46 240

     

    All about the mother

    With this budget in mind, imagine the mother in this family dies. While the emotional implications would be unbearable, the cost of replacing her financial contribution is more than most families could ever afford – in this case in particular, the other partner would essentially be accountable for just under R30 000! While the family can of course cut back on “nice-to-have’s”, such as entertainment, they will still battle to make ends meet on one salary.

    The reality is that the partner left behind won’t be able to carry the financial burden alone, unless there were plans in place to mitigate this sudden loss of income. So while it is not a pleasant conversation to have, a discussion on how you can avoid this kind of situation is worth having with your partner.

    The question to pose and answer realistically is: “what would happen to your children if you could no longer care for them due to an accident, disease or even death – would they still have a good education, as well as the lifestyle they have become accustomed to?”

    Long term insurance

    While not high on many families’ agendas, long-term insurance is one of the best ways to make sure that your family does not have to manage a financial crisis when there is a sudden loss of income due to death, disablement or diagnosis of a critical illness. This is even more pertinent if you have debt in assets such as houses and vehicles, as leaving the repayments will result in higher payments and interest over time.

    As a parent, it’s your responsibility to consider the “what ifs.” You baby-proof your home, buy a car seat for your vehicle and keep the number for poison information on speed dial. Think of life insurance like this as well – you buy it, with the hope you never have to use it, but the consequences of not having it could be financially devastating.

    Life insurance should not be seen as a grudge purchase, but as invaluable peace of mind. The right life insurance will provide you with solutions that ensure your children’s schooling, tertiary education and general well-being are looked after should you die, by mitigating possible other financial risks that follow the loss of a spouse’s income as a result of death, disability or a dread disease.

    Insurance possibilities

    When looking at life insurance possibilities, take note of where else you can invest or save money; some life insurance companies offer insurance and investment opportunities. Ensure that whichever company you choose, they offer you not just insurance for your current situation, but that it is able to adapt with you as you experience significant life changes. Like buying a home or starting a family, your life insurance will need to adapt to your new responsibilities to ensure that you and your family will be taken care of if something were to happen to either of you.

    The right cover will provide you the assurance of knowing that no matter the circumstance, you will ensure a brighter future for your family, so that they have the opportunity for a better future; now isn’t that life changing?

    Notes

    1 Bond repayment calculated using Standard Bank online Finance Calculator
    2. Amount calculated using insurance aggregator Hippo.co.za
    3. DSTV Premium package with extra view

    About 1Life: 1Life – formally known as 1Lifedirect – owned by Telesure Investment Holdings, is a registered Financial Services Provider and are 100% FAIS compliant. Launched in March 2006, the company provides an alternative long-term insurance solution with products that are simple, convenient and tailored to every client’s need and affordability. 1Life believe that financial solutions should change lives, not just the situation that clients find themselves in, and they have made Changing Lives the cornerstone of their business ethic. They pride themselves on being South Africa’s first truly direct life insurer and offer obligation-free advice to provide the right cover according to an individual’s needs and life stage, and are able to adjust this cover as significant life changes take place. 1Life is reinsured by Hannover Re and is fully committed to Black Economic Empowerment.

     

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    All info was correct at time of publishing