Page 20 - Waterfall Issue 6 2021

Waterfall News

PLAn FoR ThE

UnExPECTEd

A financial plan to help you weather

the surprises in your life

By Jan van der Merwe, Head of Actuarial and Product at PSG Wealth

you afloat, no matter what life throws to provide you with a material
at you. The rule of thumb is to have return on your investment. The
an emergency fund of three to six key is to find a solution that offers
months of your take-home income. flexibility, but also allows for
some growth on your investment
CoMPoUnd InTEREsT CAn without incurring too much risk.
Jan van der Merwe
CELEbRATE oR CRIPPLE
yoUR PLAns A voluntary investment product
Small amounts of savings add up, that allows investment into unit
L ife is full of surprises, and interest and you allow them time to no restrictions. Most providers offer
trusts is a good option as there are
especially if they are earning good
along with these can come
a range of funds to choose from,
grow. Many people rely on debt to
new financial needs that we
may not anticipate. A robust fund unplanned expenses, but debt and your money is often available
within two to three business days
repayments can have the opposite
financial plan can help to weather result when it comes to building (depending on the provider’s rules).
the unexpected events in life. long-term wealth, in that your debt
adds up the longer you avoid paying Tax-free investments are also a good
Emergency expenses come in many it off in full. Both savings and debt way to grow your capital over time,
forms, so it might be more practical attract compound interest, and it but these are better for longer-term
to think of your emergency fund as either works for you or against you, savings. You can access a wide range
a ‘what if?’ fund because life often depending on how well you plan of underlying funds and contribute
happens when we are busy making and how disciplined you are. a maximum of R36 000 a year or
other plans. If you haven’t thought of R500 000 over your lifetime. However,
starting an emergency fund, or yours keep in mind that once you handle once you withdraw money from the
needs some serious topping up, it’s an unexpected expense, it will be investment, you cannot replace the
never too late to get back on track. necessary to reassess your financial contribution amounts at a later stage.
plan, and your emergency fund
A CRAsh CoURsE In will need to be replenished. Whatever product you use to save
PLAnnInG for your emergency fund, it is crucial
The core reason for having an ChoosE An InVEsTMEnT to ensure your choice of underlying
emergency fund is to make sure oPTIon ThAT sUITs yoUR fund aligns with your savings goal:
you have easily accessible money sAVInGs GoAL you want to opt for a lower risk
should you need it in a hurry for Depending on your needs, you can fund that offers you some growth
an unforeseen event. We can’t consider a combination of different but at low volatility. Working with
deny that accidents are somewhat products, but it is important to a financial adviser will do wonders
unpredictable but being ready with have access to funds at short notice for the longevity of your plan, as
funds to help you face them puts you without incurring any penalties. financial advisers are specialists
in a powerful position. An emergency While a bank savings account who know where you should be
fund is just that – a life raft to keep can offer liquidity, it is unlikely investing based on your goals.

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18 Waterfall Issue 6 2021