Financial Thoughts and Weighing - Individual's Own Responsibility

saveoursavers.co.uk

I joined so many groups in Facebook and in one group for mommies, someone popped up the question on what is the best savings account for her children's educational fund in the future.  And it poked the interest of many mothers like me. Naturally, I read every suggestions on the comments. Suggestions such as banks which offers kiddie accounts with as low as P100 minimum opening account. To banks which offers kiddie savings account with free insurance.

Some others recommended that instead of savings account is to get a Variable Unit Linked or open a mutual fund or a unit investment trust fund.

Weighing on the comments, I bolted my personal opinion on the matter. I mentioned that if it is for future educational fund in about 5 to 10 years in foresight, I recommended for UITF or Mutual Fund on moderate to aggressive types. That is if you are not into stocks trading yet. But (yes there is a but) which I added into my comment. First one has to have an emergency fund set aside and all bad debts were already paid before dipping both toes to investment.

A VUL representative came in to picture and try hard to sell her VUL product that on every comment she would see to it that she inserted her view of how a VUL could help. I know it is helpful and how important an insurance is. I am a policy holder too.

A mommy asked about the emergency fund. Told her that it should be the money set aside in a savings account or a portion keep at home that should be use in case you lost your job, or if someone got sick. It could be 3 months worth of expenses or more. She asked me how to compute. I said if your monthly expenses is 10,000, then 3 months worth is 30,000. And she grasp telling me that it is impossible. And turn herself to the VUL representative asking how VUL works and if she can get the money just in case she needed.

In my mind I asked what will happen to that policy if after a year the holder will have to stop paying because the holder no longer is capable to pay even the premium? Yes, there is a phase. Not that the policy will lapse immediately because of course there should be at least a very little fund value. Given the lead-time before it will lapse and after which the holder could not still pay the premium, the policy will meet its end. If in few months time, the policy holder now has enough money to pay, the next question is then how much will it cause you to pay the reinstatement? Is it wise to reinstate it or get a new one? Can you now sustain the new policy?

Financial advisers, please correct me if my understanding is incorrect.

The truth is SOME so-called financial advisers will really hard sell their VUL products without actually understanding the situation of the clients. So be careful with this. I know TIME is an element in order to build wealth. But things should be done in order. Otherwise, if no emergency fund and you are still in hole of bad debts and decided to get ANY investment, you might likely withdraw the funds prematurely. Think about what it will cause you having to get the money before it even earns.

I am in total disappointment with the representative's response, because we all know that on the first years of our policy, the fund value is relatively so small. And no, I do not generalize all financial advisers. I just wish every each of them should be financially responsible to their clients. Common mistakes is that we go with the tide and lazy enough to study the things that could benefit us. And that, we are to consumed with an overwhelm feeling of having an investment, only to withdraw prematurely because we do not have emergency funds. Or 'selling' immediately because we have high paper loss when in the first place we did not even study what we are getting into.

Some random reality check on my part. By the way, this draft was sitting too long in my list and I could no longer remember what put this on hold for such a long time.