As part of Financial Planning Week, we will be presenting a quiz each day to help you better define your financial goals and build a sound financial plan. One lucky winner selected at random from the Editor's hat will win a hamper of tasty goods--see below to find out how to enter.
Our quiz for Day 3 of Financial Planning Week covers saving for all the "unmentionables."
Consider this scenario: Ciaran is aged 32, earns £30,000 per year and is married to Penelope, aged 30. They have two children aged 4 and 2. Penelope works part-time earning £10,000. They have a mortgage of £85,000 on their property valued today at just over £90,000. Ciaran has worked in the architecture industry for five years; his employer provides a salary continuance scheme so that Ciaran will still be paid two thirds of his current pay if he’s off sick. Penelope has just started her casual part-time job after looking after the children full time until now.
They have no other insurance, minimal savings, and a very limited budget to pay for protection. What do you think should be their priority in the following situations:
1. Taking out life cover for the mortgage
a) On Ciaran’s life only because he’s the main earner
b) On Penelope’s life because Ciaran is already covered and Penelope looks after the children, so Ciaran would have to give up his job to look after the children if she died
c) On both lives so that the mortgage would be paid off if either of them died
d) It’s not necessary because all mortgages are paid off on death of either borrower
2. Providing financial protection against the impact of long term
sickness or disability
a) Cover for Ciaran because the loss of his earnings would be
potentially catastrophic
b) Cover for Penelope because if she were to suffer long term illness or disability she wouldn’t be able to make the same contribution towards looking after the children and wouldn’t be able to work
c) Additional cover for both of them
d) No action necessary at all. Ciaran is covered already and Penelope doesn’t need any
3. Providing some sort of cover in case of job loss
a) Redundancy insurance on Ciaran because unemployment for him over a
long term period would be catastrophic
b) Redundancy insurance for Penelope
c) Redundancy insurance for both of them
d) No action necessary
4. What other action do you think should be a priority for Ciaran and
Penelope?
a) Taking out some insurance on the children’s lives
b) Taking out accident cover
c) Trying to build up some savings in an emergency fund
d) Trying to reduce their mortgage
Submit your answers by clicking here, entering your name and e-mail address, and typing either a), b), c) or d) for each of the four questions in the message box. Good luck!
Having financial goals and understanding the choices available to you are central to making successful investment decisions. As such, all this week, Morningstar is partnering the Institute of Financial Planning in promoting Financial Planning Week. You can find out more about our efforts here.
