What are the VULNERABLE YEARS ?
Early years of marriage (or long-term relationship) and the starting of a family
👫💑💍🤰🏻👶🏻
Financial needs -
Build up an EMERGENCY FUND (instant-access savings account)💰💰💰
In the event of partner’s death😵💀(or not being able to work due to poor health🤮):
Pay off mortgage (life insurance)
Replace income/provide childcare (life insurance or income protection)
What are the RELAXED YEARS ? 😴
Generally when people enter their 40s
- Reduced protection needs for children
- Pensions and savings needs = priority
- Household income has (usually) increased
MAY WANT TO
increase sum insured and term of life insurance(s) and income protection (to retirement date, for example)
OR if existing policies cannot be amended = new policies
put additional £250 (for example) into pension(s)
What are the ANXIOUS YEARS ? 😬💆🏻♀️💆🏻♂️
Generally when people enter their 50s 👵🏻👴🏻
MAIN RISKS
- INFLATION RISK
Inflation = rate at which general prices are rising. As prices 📈 purchasing power of money 📉. Inflation can affect value of savings. Interest provides some protection from inflation. Only LONG TERM way to beat inflation = invest in products that increase in value at a rate greater than rate of inflation (shares, for example)
- INVESTMENT RISK
Possibility that a customer might lose £££ on an investment.
SHARES: dividend payments and rising share prices NOT GUARANTEED🙅🏻♀️
BONDS: interest payments or return of capital on maturity NOT GUARANTEED🙅🏻♀️ if a company does not make enough £££
SOLUTION ? Use COLLECTIVE INVESTMENTS👨👩👧👦 = spread investor’s money
What are the LIMITATIONS OF THE PERSONAL FINANCIAL LIFECYCLE MODEL?
Some people’s lives do not fit into the lifecycle pattern:
- Those who remain single 💍❌
- Those who never have children 🤰🏻👶🏻❌
- Those who are permanently disabled
Unexpected life events (divorce💔, or dying earlier/later than expected😵💀) = different pattern of needs
Some people’s incomes do not fit:
- People may earn more when they are young
- Certain occupations = people retire younger than usual (professional athletes/those in the armed forces) ⚽️🎾🏓🏏⛳️
What is INCOME TAX ?
Deducted from our salaries before we receive them. For self-employed people = deducted from their profits
Some financial products = free of income tax; for example, the monthly benefit from income protection. Income from a pension MOSTLY TAXABLE
What is CAPITAL GAINS TAX ? 🐷🐽
Payable when a profit is made on the sale of an asset
What is INHERITANCE TAX (IHT) ?
Payable where the estate of a deceased person is worth more than £325,000 (£425,000 = leave home to children)🏡
