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Financial Adviser | Saving for school and home purchase

Published:Friday | September 2, 2016 | 12:00 AM

QUESTION: I would like to start saving for future studies and a home. I was approached by an agent of a life insurance company who is recommending that I do a short-term investment and critical illness insurance. I was, however, thinking about joining a certain provider of a wide range of financial services. Any advice you can offer regarding the above would be greatly appreciated.


FINANCIAL ADVISER: A good starting point for moving to the fulfilment of your goals is to set a time for the achievement of each. It would also make sense to have some idea of how much you want to save, but that can be quite difficult.

Knowing the above should help you determine what strategies to use and how much to save and invest as you move along. As your situation changes, you should be able to make adjustments, but you should be realistic in your expectations.

A major challenge you will experience is the relatively low yields on most safe investment instruments, which means it will take quite some time to accumulate the funds you will need. Of course, you can opt for higher-yielding instruments, but you should realise that they carry far more risk so much depends on your own willingness and ability to take risk.

I am assuming that your educational goal is the less long-term of the two, but a good education can help you to realise your other goal as it should enhance your ability to earn more. Granted, the cost of housing is increasing rapidly, thus making home ownership less and less likely for those who do not now own one.







Considering today's realities, you should fit your expectations to a housing solution that you can afford. You may not be able to afford your ideal solution but bear in mind all available financing options such as the National Housing Trust.

However you look at it, you must save as much as you can to make funds available to build your portfolio. You may have to make serious sacrifices today to realise tomorrow's goals. If you have not yet started a budgeting programme, I suggest you do so to enhance your ability to increase your savings.

I am suggesting that you devote some time to learn about the various savings and investment options so that you can make suitable decisions.

It is natural that insurance agents will approach you and the rest of us. Selling insurance is what they do to make a living, but what action you take depends on what solution they are offering to meet your needs. At the end of the day, it should not be that somebody sells you insurance but that you buy insurance.

You did not say that the person did any fact-finding which was used as the basis for making recommendations to you. I suggest you do not waste your time with insurance agents (advisers) who do not take that approach in their dealings with you.

I do not understand the basis for the recommendations made to you in relation to the short-term investment. Was a need identified that justified that recommendation?

Critical illness insurance is important, but you have to determine how important it is to you now and where it fits into your overall financial plan.

You did not say how old you are. This is important as it will have a bearing on how you go forward. Your current and expected future responsibilities will also have some bearing on how you proceed. Whatever you have to do, start now.

- Oran A. Hall, the principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.