“Dad!”, said Amit petulantly, “I have a movie to go on Saturday with my college gang. Ever since I joined this company a year back after my MBA, it’s been so difficult for us all to even get together, forget doing stuff like hanging out and watching movies like we used to, earlier.”
As his father looked on at Amit calmly, his wife Laila walked into the living room, and said to him, “Mayur, what seems to be the problem with our son?! Are you not letting him go out to meet his friends, he’s not a kid anymore!” And Amit chimed in, “Look Ma, he’s asked his Insurance Development manager to meet us here tomorrow.”
And then Mayur smiled. “Is that your only problem? The movie? What if I ensure our meeting in the morning gets over within two hours? Then you will have all the time to go out, lunch with your friends, watch your blockbuster movie and still spend more time with them in the evening too. Deal?”
Laila gestured to Mayur, ‘So where’s the problem, Amit? However, I do wonder if you are in too much of a hurry to get him into complicated insurance planning and all that jazz so early in his life, Mayur…”
“Laila, he’s in no less a hurry to watch weird trashy movies, so why not get into a bit of a tizzy about something that will ensure his financial safety and a more peaceful life…now just listen to me both of you, and Amit, I promise you will be so glad to get onto financial planning with insurance that your movie will sound much less exciting a prospect tomorrow that it does to you now!”
It’s no mumbo-jumbo really. As one grows through various life stages, and advances in life, one experiences different life stages that have an impact on financial goals. I have learnt this to some extent the hard way, and your mom has been my supportive partner through my years of finding my financial feet.
For example, your twenties are highlighted by some key milestones. You will be finishing your higher education and getting your first job this is the stage you are at right now.
You have just started building your career, and do you really feel the need to be careful about the money you are earning? I don’t expect you will. And that is why I am talking to you about this.
You are single now, and have no dependents. Fortunately your mother and I are independent. Please note that this is the best time to establish a firm foundation for your financial future by learning good financial habits: You should spend only after you save, you must stick to a clear budget and yes, you definitely need to save for the future.
Amit was listening intently. ‘Well, Dad, I already have a credit card, and you have helped me invest in mutual funds with good long-term compound interest…”
Mayur said, “But there’s more…you are most likely to get married in your twenties too…and starting a family very soon after that.”
This means that your financial goals might include moving to your own place and paying rent, maybe buying your first car…it would make more sense for you to start saving to buy your own house.
Settling down, or having children are life-changing events that will require you to review your finances carefully after all, it’s not just yourself you have to think about now. So your other needs would include Mortgage, Motor insurance, Health insurance, Travel insurance.
But not to worry, it’s not rocket science. We can tackle all this in stages. Let us start with Life Insurance first.
Laila wanted to know why Amit should not wait another five or ten years to think of insuring his life, it seemed such a grave matter to consider. But Mayur said that it makes a huge difference in the overall cost of insurance and affordability of the sum assured. The factors that contribute to this are the age factor, and the ability to pay for a longer period of time, hence the ‘Insurability’ of the person taking the insurance policy is enhanced.
Ideally I believe you should take a Term plan that should give you
- Flexibility of payout options
- Low Cost Term Insurance Plan
- Tax benefits for premium and claim amount
- Comprehensive Cover through Riders
Let me do a comparison of two hypothetical policies that my agent gave me access to…one for when the insured is 25 years old, and another for when he is 35 years old, both non-smokers.
For a Sum Assured of Rs.1Crore cover till age 80, a 25 year old pays only Rs.8070/- annually, as against Rs.12,990/= that he would have to pay if he were 35 years old at the time of taking the policy.