As more young people embrace investing, it’s important that they understand the value of long-term insurance, too.
Attitudes towards managing and accumulating wealth through investments change gradually over time and one indicator of this is the number of younger investors who are putting their spare money into the financial markets.
According to research among clients under 35 by financial services provider Liberty, which is part of the Standard Bank Group, some 90 000 clients use the insurer’s investment offerings.
This number doesn’t even include some 230 000 Liberty clients in this age group who use the company’s online Stash savings app.
The research goes on to note that, meanwhile, only 30 000 clients under 35 are putting money into retirement annuities, and only around 10 000 have taken out life insurance.
The pattern here is clear – younger clients are prioritising putting their spare money into investments as opposed to taking out cover.
Changing priorities?
It’s good that young professionals are paying attention to savings and know where to get the products they need. Does this mean the value of long-term insurance cover is reducing, at least in the minds of younger earners? Probably not, but for advisers, it might be a good idea to remind them that no one is perfect and nor are our circumstances. Life happens to all of us. And our investments.
So how do advisers emphasise the value of long-term insurance?
We know that young professionals turn to financial markets to hedge their spare cash, but are not realising the unique advantages of retirement savings – which are also market based, but have the extraordinary benefit of being not only tax deductible from a person’s earnings, but also not subject to further tax on their growth.
It’s also well-known that many younger professionals don’t like retirement savings because they cannot access their money until they are 55. But, it’s worth pointing out to them that the Two-Pot System has now changed this, allowing yearly withdrawals – although these are subject to normal taxes.
A life covered is a life lived
While younger clients investing their money is always a good thing, advisers do need to remind them that investing in the future includes making sure you’re covered for life’s turns. After all, what good is money if clients or their families cannot get to enjoy it to the fullest in the long run?
Liberty’s 2024 Claim Statistics show that 2.2% of insurance claims came from people under the age of 35, making it evident that death, disability, and critical illness can affect anyone, regardless of age.
Advisers should always emphasise that having life insurance is an investment in family life – meaning that the families young professionals are building can benefit and continue to have a chance to prosper even if they should pass away. It’s about building a legacy of success that can continue even if the worst were to happen.
There is also the matter of being insured for disability or having to spend time recovering. While younger people are less likely to suffer from critical illnesses, they are more prone to serious injuries from things like car crashes, insurance figures indicate. Being insured for events like this means their investments don’t have to be spent on recovery. This is an important point to make.
Investing money is always wise, but a client investing in their own life through personalised cover is equally so. This part of life’s long-term equation should never be neglected, and here it is up to the individual adviser to keep their clients on the right track for success.