Car accidents, fire, death . . . no one expects these things to happen. But that doesn’t mean you have to be caught by surprise financially too. Placing a few items in your financial first-aid kit can help soften the blow.
The first is an EMERGENCY FUND. Experts say it’s safest to have two to three months’ salary available for a crisis. Your emergency fund must be easy to access and therefore not exposed to market risks - you need certainty about the amount available to you.
Money market funds are a good place to put emergency funds. Another option is to pay extra into your home loan. There’s currently confusion about whether additional payments into bonds are still available so check your contract.
The second product in your first aid kit should be DISABILITY COVER. Many employers provide disability cover but arrange additional or stand-alone cover if you feel it’s insufficient. The amount depends on your lifestyle, age and financial needs.
Changes to the Road Accident Fund law means it’s essential to organise greater disability and medical cover than in the past. If you’re disabled in a car accident you can no longer claim unlimited compensation. A claim for loss of income due to a road accident is now limited to R160 000 a year, irrespective of how many dependants you have or whether your earnings were three times that amount.
This brings us to the third essential for your first aid kit: MEDICAL COVER. Medical schemes adjust their benefits annually so yours could differ from what they were a year ago. If you have hospital cover only, find out what the limits are and to what degree emergency expenses such as chronic medication and day-to-day costs are covered.
Some medical aids offer savings plans for non-hospital expenses but this option means you must manage those expenses well or day-to-day costs might have to come out of your own pocket. Other medical aids offer these benefits on a use-it-or-lose-it basis. Make sure you fully understand your package.
The last item in your financial first aid kit should be your WILL. If something happens to you a good, correctly drawn up document will spare your already traumatised family further problems. It’s important to ask an expert to help you put it together to ensure it’s easily understood.
