Entrusted with financial responsibility
Credit to Author: RIENZIE BIOLENA RFP| Date: Fri, 01 Mar 2019 17:39:32 +0000
Life affords no greater responsibility, no greater privilege, than the raising of the next generation’
–C. Everett Koop
The travails of being a parent present great opportunities for learning and praxis. Being a registered financial planner myself, I have been exposed to details of sound financial planning for persons and families: managing cash and debt, planning investments, insurance, preparing for retirement, and preparing for children’s education.
But knowing one thing is entirely different from experiencing it yourself. When one gets to be married, be a parent and a husband at that, the family is being entrusted to you. And this is where life gets better—and more challenging.
As soon as my wife gave birth on our first child, the reality of preparing financially for our family’s future became all the more imperative. I had a term insurance worth P1 million at the time, but with the change of my marital status and the arrival of our newborn, it suddenly was insufficient. Thinking about my child’s future and my wife, I sought out to increase my insurance coverage—as affordable as our budget can take, and with as much protection as I can get. Quality education comes with a price nowadays, and computing back then how much it would cost my child’s, I knew that savings is not enough.I have to secure the amount required as soon as possible should something happen to me.
Back then, I computed that a tuition fee in a good school will cost around P150,000 per semester by the time that baby will be in college, and this amount still does not include other expenses such as miscellaneous fees, books, allowances, rent, etc. The coverage I had back then really was insufficient.
Moreover, my wife is just beginning her practice as a physician, and I will want to leave some amount of money to support her all the more should something happen to me.
After much studying and comparing products, it was providential that my former boss–who is a bank manager—has offered me a product that fits perfectly into what I needed: maximum insurance protection relative to its cost. I availed of it right away. With the additional coverage, I was more confident that my family’s expenses shall not be disrupted in case of my death.
But insuring oneself is just one part of being financially responsible for the family. Storing enough savings for the rainy days is a must.
Prudent financial planning recommends 3 to 6 months’s worth of expenses as emergency fund.
Building-up the appropriate level of emergency fund remained both a challenge and a target most especially when income and expenses are almost at the same level. But it had to be done. It was not easy, pooling together one’s finances for a common purpose. Our agreement right before marriage helped a lot. We already talked how we will handle our family’s finances. My wife has an eye on details and has a knack for budgeting and bargaining. We thus agreed that she will be handling our family’s money while I handle the excess funds. She is the chief finance officer and treasurer while I, the chief investment officer.
After much sacrifice, toil and arguments on handling money, we were finally able to achieve our desired level of emergency fund: six months’s worth. But as the amount of the fund is quite substantial, placing all of it in just a savings account bearing 0.25 percent interest will be such a waste. But not when there are other instruments that can give a higher return and can still be practically as liquid. We thus spread our emergency fund into a passbook savings account, a time deposit account and a money market fund. This approach lets us maximize the earnings potential of our idle funds, as the returns of the last two are almost double that of an ordinary savings account.
Insurance coverage: check. Emergency fund: check. The bedrock of our finances has been established and as such, we are then able to plan for our other goals in life: saving up for her clinic, building up and allocating for our land purchase, and saving up for our children’s education.
The list is just the start of a very extensive one. But whatever the goals or circumstances in life, being entrusted with a little angel and my own family means being responsible in our finances for now and the long years to come.
Rienzie P. Biolena is a Registered Financial Planner of RFP Philippines. He’s also Chartered Wealth Advisor (CWA) and chief financial planner of WealthArki and Consultancy, a financial planning firm. Learn more about personal financial planning at the 75th RFP program in April 2019. To inquire, e-mail info@rfp.ph or text to 0917-9689774.
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