During the past two weeks I had several meetings that once more illustrated how irresponsible people are when it comes to finances. The first of these meetings was on bikers. The clubs are growing tired of having to go begging for money to bury fellow members who die in accidents, or if they die for a different reason as was the case with the road rage incident that is serving before the courts at the moment. Bikers, illustrated by the way they drive, will be expected to be irresponsible and they do not even buy the simplest of covers, funeral insurance. But it does not stop there.
Schools are inquiring about accident injury policies for learners while in their care. Why? Because, parents do not have medical aids or medical insurances and hold schools responsible for injuries and proper care when their child is injured at school; while on a school event; or, due to a sport injury. The school, as much as the biker club, must take responsibility for the child and costs can only be averted by taking an injured child to a state hospital facility. But how do you divert ambulance cost if the child must be transported from place of injury to the hospital.
While I am able to present solutions to both entities I realised that the problem starts with each individual, the readers of these articles. Today we want to look at how to make sense in becoming a responsible financial provider and to not think that we make it okay by claiming that ‘I cannot afford it’.
People forget that it is all about liability toward another (third party). The road rage incident, at great cost to the legal system, will probably be about who was responsible/liable. If the biker was, he will get no reward; if it was the other driver he will receive a police record and some sentence.
Responsible financial management start with simple solutions, e.g. a third party motor insurance will cost less than R100 per month removing most liabilities against third party claims. It is, however, not only about third parties and most other needs are self-serving ones and fall into four categories.
1. Health needs
In the schools example we see that there exist a need for health, injury and accidents. Most readers think that because they cannot afford a medical aid they cannot take care of these needs. There exist several solutions that are not medical aids but that can take care of hospitalisation and most day to day care needs for 25% of the cost. Schools are not clear thinkers and will only ask for medical aid details, not thinking that other insurances can serve the purpose. You can enter the detail of your solution on the application form for their referencing. The cover is not restricted to scholars only and will take care of the needs of parents and children on a 24/7 basis anywhere in South Africa: while travelling, vacationing and at home.
2. Life Needs
Almost every other bodily need that is not taken care of by health insurance and medical aids will be catered for by life insurance. From replacing the loss of income sustained while in hospital and during recovery; to death, disability, suffering a severe illness (cancer strokes etc.); up to the basic funeral cover. This industry has become so sophisticated that they can take care of children’s’ studies after your death all the way to tertiary level (even internationally for the geniuses); and taking care of you when you become frail after age 65.
3. Insurance needs
Loss of a car, cellphone, tablet, laptop, TV and other household goods after an accident, theft or fire are all taken care of. In these there are no excuses when the liabilities are dirt cheap to take care of, followed by fire, then theft (quite expensive in South Africa), and then, the cost of own damage (the most expensive)
4. Investment needs
This is the only category of financial responsibility that takes care of future needs, while all the above three take care of current needs. It is, however, the most important and if not taken care of will not allow you to take care of the above three when they become the then current expenses of the future.
To make sense and be responsible we need to take care of all four areas in our lives. I know people who buy the best medical aid they can afford and do nothing about the other three. This is not only wrong but ill-advised and detrimental.
I apply a simple formula to determine a ratio for amounts to be spent in each area, based on the family income and only then go and seek solutions that fit that budget and will respond to readers who supply their age and family income. I will also advise you where and how to gain access to the more affordable insurance options.