If your family's income were unexpectedly impacted, would you be able to pay the bills without any problems? Many would answer no, as they don't plan for unforeseen events. For situations like this, the ideal is to have family financial protection.
An research carried out by Anbima showed that 56% of UK citizens don't save money to use in unexpected situations and don't even have a reserve for when they retire.
Only 21% say they have a financial plan to face retirement smoothly in the future. The truth is that those who don't plan live in the red or on the spending limit every month.
However, it is possible to guarantee security through family financial protection, not only for this mentioned retirement period, but also in case something arises that could compromise the budget domestic.
But do you know where to start and how to put family financial protection into your budget? To help you in this regard, we will address this article:
- What is family financial protection?
- How does financial protection work?
- How important is financial and family protection?
- What risks can be prevented?
- Tips for Developing Family Financial Protection
- Types of family financial protection
What is family financial protection?
This is extra income, support, financial support in case you and your family members have any kind of financial unforeseen event that could compromise the income of the family.
It commonly serves as a support to support retirement, but it is not used only in this case, as it also works as a security in case of unexpected expenses due to the treatment of illnesses, accidents or any circumstance that could affect the family budget.
An survey conducted by FenaPrevi Ipsos revealed that 35% of UK citizens have some type of family financial protection. In the top 3 appear: funeral insurance (11%), death insurance (8%) and disability or personal accident insurance (4%).
How does this financial protection work?
Family financial protection works as a financial reserve, where a person hires a company, paying a monthly amount to it, and he is responsible for setting aside an amount to cover expenses related to a given situation.
For example, if a family member died and was the family's income provider, if he or she has a family financial protection, the spouse, children and dependents will not be destitute.
If the person is qualified by the insured, he/she can request the payment of the amount provided for in the contracted protection, which will guarantee the sustenance and greater peace of mind so that the family can reorganize after the loss.
How important is financial and family protection?
This type of protection is especially important to maintain the financial security of the family. Since, regardless of any unforeseen circumstances, the family budget will not be compromised.
Family financial protection can be important for:
Protect the family against unforeseen events
There is a saying that says “no one knows what tomorrow is” and in fact this is true, that is why it is important to prevent so that unforeseen events cannot compromise the financial health of the family.
Family financial protection acts as an emergency reserve to meet these unexpected situations.
Family financial support
Financial protection can also be a support for the family to recover, whether due to the death of a relative, disability or to pay for medical treatment, in case of serious illness.
Thus, the family finds it easier to act quickly, strategically, without negatively impacting the family's finances.
What risks can be prevented
Family financial protection can prevent the family from various risks. Three common situations are highlighted and can be prevented. Check out what they are below:
Lack of family planning can be a problem in the future, in retirement. Therefore, family financial protection works to maintain a standard of living for the insured and also so that his family does not have much of his income compromised when he retires through social security.
opting for a supplementary pension, within this idea of family financial protection, it is possible to maintain the same standard of living as when this family member was working and receiving their full salary.
Lack of money to support the family
The main function of family financial protection is to keep the insured person's livelihood safe, as well as his family members and dependents in any situation. This means that the insurance, depending on the clauses, can cover different problems that the family may go through.
Financial problems in the event of the death of a family member
One of the most used options in terms of family financial protection is the life insurance, with it, the beneficiaries who are indicated in the signature of the contract by the insured are entitled to receive an amount so that they are not financially helpless, with the death, often, of the person who is the family's supporter.
Expenses with medical treatment
Family financial protection can also be important to provide financial peace of mind in temporary absences or support to cover expenses related to unexpected medical treatments and others.
With this, the subsistence of family members and dependents can be maintained or at least ensured for a period. Whether to cover the children's studies in the future or finance financing (property, car)
Tips for Developing Family Financial Protection
Knowing now the importance that family financial protection can have in the family's routine, let's go to some tips that can help to develop this culture, which can be important to maintain the tranquility and financial security of family members and dependents.
Know family expenses
The correct control of family financial protection lies in knowing the family's expenses. This is because it is from there that it will be possible to determine how much you would need if a unforeseen in the budget.
This simulation of expenses and control over the budget itself is also important for taking out insurance, for defining what is a priority, and for ensuring a smooth retirement.
project the future
What are your family's plans and goals? One tip for developing the family's financial protection culture correctly is to be clear about the future expenses that can be measured. Like the children's studies, the purchase of a house, a car and others.
Having all these details at the tip of your pencil are essential for a prior planning of what is planned within the family's goals, without these projected expenses appearing as surprises when they start to be part of the family's costs.
Organize everything as a family
As its name suggests, family financial protection is an asset to everyone involved. This means that to develop family financial protection, everyone in the household needs to participate in this planning.
After all, at one time or another, if necessary everyone will enjoy the benefits of family financial protection. Whether it's activating life insurance, disability insurance, time off, or any other situation.
It is important, therefore, that everyone is aware of the cost of living, spending cuts, goals for the family's future, etc.
run away from debt
72.9% of families in the country are in debt, according to the Consumer Indebtedness and Default Survey (Peic). For every four UK citizens, only one manages to pay their debts on time.
One of the great enemies to develop family financial protection is the debts. Those who get into debt live in the red and cannot save, make plans or protect their assets, which provide security for the family.
Therefore, a tip to create a culture of economy is to avoid making accounts that exceed the limit of the family budget.
This means staying well away from the credit card, opting whenever possible for purchases on debit card, avoiding unnecessary expenses and prioritizing what is essential to maintain the financial health and physical well-being of the family.
Types of family financial protection
Anything related to saving money or saving it for unforeseen events can fit perfectly as a form of family financial protection. Since the main objective of this culture is to achieve financial security in any unexpected, sudden or future situation, such as retirement.
Some types of family financial protection that can be highlighted in the market are:
- insurance (life, disability, accident, financial protection);
- investments (stock, funds and others);
- private pension (support for retirement).
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