Protecting your family financially on The International Day of Families
A United Nations initiative, the International Day of Families was established in 1993 with the aim of providing ‘an opportunity to promote awareness of issues relating to families and to increase the knowledge of the social, economic and demographic processes affecting families.’
One very important economic issue which hugely affects the welfare of families is financial security and that is the topic we would like to dive into to celebrate families everywhere on this dedicated day.
The link between financial security and happiness
In 2018 Northwestern Mutual in the US released research which revealed that nothing makes people happier or more confident than feeling like their finances are in order. A non-scientific anecdotal survey of our financial consultants backs up this finding with many noticing how clients have benefitted immeasurably from the peace of mind that comes with having the financial basics covered.
It’s important to note that it’s not wealth per se which induces the feeling of financial security but rather the knowledge of having built a shield of financial protection to defend loved ones against life’s inevitable twists and turns. You can do that whether you earn five figures or seven.
Four ways to financially protect your family
A protected family is a happy family so who wouldn’t want in? Here the four crucial elements you need to put in place to build your family’s shield.
1. Protect against unplanned financial emergencies
Rainy day savings are the key here, otherwise known as an emergency fund. If you don’t have one, start saving now to accumulate six months’ worth of essential monthly expenditure. Having that buffer of cash sitting easily accessible in a bank account will take away the stress of wondering what you would do if something unpredictably expensive were to happen. That could be finding yourself unemployed for a period, a big unexpected bill or having to urgently replace your car.
2. Protect your family’s health
The research quoted above reveals the rising cost of healthcare as the number one concern of Americans with 59% experiencing high or moderate levels of anxiety over this issue. In addition, 53% fear an unplanned health emergency. The good news is that this fear can be almost entirely eliminated by taking out a comprehensive health insurance policy to cover everybody in your family. The financial risk of one of you falling ill and needing expensive medical care is transferred to your insurer. That’s peace of mind right there.
3. Protect against loss of income if you die
We are all reluctant to stare our own mortality in the eye but sometimes it has to be done. Hopefully you will live a long and happy life but in the absence of a firm guarantee the next best option to protect your family is to take out life insurance. Knowing that a lump sum payment would be forthcoming if you came to an early demise is reassuring and the ultimate in protection from beyond the grave.
4. Protect your estate
Again, this one is on the morbid side and often neglected for that very reason but it really is important to do some estate planning. There are steps you can take now to minimise the amount of inheritance tax payable when you die. Because, let’s face it, who wants to give more money to the taxman than they need to? There are other essential to dos such as naming guardians for your children and, for expats, cross-border estate planning issues to take into account, particularly for those with assets in different jurisdictions and/or spouses of a different nationality. Professional advice is essential.
Clearly there is a lot that can be done to work towards financial security. It might seem daunting but take it one step at a time and you’ll be amazed at how quickly you can build your family’s protective shield and gain peace of mind.
If you’d like help or advice on any of the issues mentioned here, Infinity have a wealth of experience in helping families throughout Asia reach that happy place of financial security. Do feel free to contact us for a chat.
A leading provider of expat financial services and wealth management services across Asia.