Sometimes, we think we are doing good financially because things are going pretty smoothly. Rent gets paid, so do bills, and there may even be a little bit of money at the end of the month to save for a rainy day. But what if instead of raining, it started to pour? How would you weather that storm?
Recent research from insurance company Zurich shows that almost a quarter of UK adults (24%) lack sufficient savings to recover financially should something go wrong. And yes, money doesn’t buy happiness, but in a time of crisis, it sure can help make your life easier.
The study report that people are more likely to insure their home, car, or even their phone than their income.
And in life, it is often a matter of WHEN things are going to go wrong rather than IF. What if an accident prevents you from working for six months? For the rest of your career? No one likes to talk about death, but that is a sure outcome for all of us, sooner or later. So how can you plan and protect yourself and your family from financial hardship?
A third of people interviewed said they would feel financially resilient if they have £1,000 to £2,000 to count on every month. 18% would need £2,000 to £4,000.
34% of adults interviewed said they would not be able to recover quickly from a financial shock, such as losing their income for an extended period of time, or having to come up with a huge lump sum at a moment’s notice. That is equivalent to 17.6 million adults in the UK, with another 15% having no idea whether they would be fine or not.
Knowing where you stand financially is the first step to financial resilience. How much do you have saved up? How lean can you live if you lose your job? Could you downsize, sell your car, cancel your phone service and other monthly obligations?
If you are making £2,000 a month, and saving £200, it would take 10 months to come up with £2,000 to replace just one month of income. After 10 years, you would barely be able to live off your savings for a year. And, that is assuming absolutely nothing happened that made you dip into your savings during that decade. No car breakdown, no illness, no leak in the roof… This is a pretty precarious situation to be in, and you don’t want to resort to high interest credit card, or be obligated to tap into your home equity and risk losing your house just to stay afloat.
Only one in 10 adults have income protection, a financial product that would cover part of your income if you became sick or disabled. Compare that to 71% of adults having home insurance, when often the pricing can be similar.
Zurich reports that a 35 year old person earning an average salary of £27,000 could protect half of their net income for as little as £9 per month!
That income protection would last for up to two years in case of illness or injury.
When you decide to insure your income, or your life, what you are really insuring is the financial stability of yourself and your loved ones. Making sure dramatic life events won’t prevent your family from getting ahead. Even as a single person, you want to secure your financial resilience and not be detrimental to other family members.
This duty becomes even more important as you start having kids and aging parents who need care for themselves too. So unless you have the means to survive a financial crisis with your savings, consider protecting yourself and your assets.
Click here to get a quote from Zurich’s Life Protection range of products.