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Does Your Family Have Enough Savings in Case of an Emergency?

Updated 07 Jan 2020 – By Team Loanstreet


In collaboration with 

No one expects anything bad to happen to them until it does. This is why having sufficient savings is important. You know this already - it can help you lessen your financial burden when there’s a major car/home repair, unplanned travel, medical emergencies, or in case you lose your job or you become temporarily unfit to work.

Based on the data that we gathered from the  “I Cover You” survey, almost half of the respondents (43%) have savings below RM5,000,  while 18% of respondents don’t keep track of their savings or have  ZERO savings. Although this number is small, it still shows that there are people who should be paying closer attention to their finances.



Some may feel that with the increasing cost of living and stagnant wage growth, it is difficult to save. However, it all boils down to budgeting. If you haven’t started, you can use the ever-popular 50:30:20 rule to help you put some money aside for rainy days. 

But, how much is enough? According to most financial experts, to be considered financially secure an individual/household should save at least 6 months’ worth of expenses

For example, a household that has RM2,000 per month of expenses should have at least RM12,000 in savings. To reach this amount, it is recommended that 10% to 20% of net income (after tax and other deductions) should be saved until the appropriate amount of savings is reached. 

 

But… is savings alone enough to achieve your family’s financial security?



The idea of savings is to cover unexpected events or emergencies. But, how many of us have sufficient savings that can save a business in financial trouble or cover serious long term illnesses?

What if you get injured, get diagnosed with a critical illness or become permanently disabled? This means you’re no longer able to work which means no income. It’s an even more serious blow if you are the sole breadwinner of your household.

Not only do current expenses need to be paid for, but you may also need to hire extra help to keep up with housework and childcare, buy medications, medical equipment, etc. So, do you think your savings alone is enough to sustain you and your family financially?



Okay, you could say that you can get financial aid from SOCSO, withdraw money from EPF or other benefits that you’re entitled to. However, those benefits are not going to last long. A hard pill to swallow, but usually, people run out of savings sooner than expected. You could end up taking a personal loan (subject to the bank’s approval) which further compromises your future financial security.

 

Also, the process of withdrawing savings can get tricky if you’re deceased…



No, no, we’re not being morbid here, but dying is a sure thing. If you’re destined to die unexpectedly tomorrow (touch wood), are you aware that your assets including bank accounts will be frozen?




When the financial institutions come to know about your death, your family can only access your accounts after a court order is obtained - which is why we said that withdrawing the savings from a deceased family member would be tricky. Your family cannot touch the account without a Grant of Probate. And getting this grant can take anywhere from 3 months to several years depending on the nature of the assets and whether any dispute arises. 

It’s even harder when you don’t have a will because there’s no named beneficiary. This means your spouse/family will need to obtain letters of administration (LA) to be appointed as the administrator of your estate for the High Court or Amanah Raya Bhd. This would take about 2 to 5 years.

 

You might think that there must be a loop in the system, right? Here are a few situations to give you a clearer picture.

Situation A: “What if my spouse/family knows my PIN number? Can withdraw money?”



Not everyone will share their PIN number with their family and by right, you’re NOT supposed to do so. But, some might still share this info for when unfortunate things happen. 

The question is, can you withdraw money from a dead person’s account? The answer is YES, you can - as much as you want according to the account’s daily limit withdrawal before letting the bank know about the deceased. 

But, is it legal? NOPE, not until the spouse/family has been granted probate. It’s an offence under the Public Trust Corporation Act 1995.

You see, to close a bank account, your family needs to bring the death certificate to the bank. And, if there’s any suspicious activity found between the time of death to the time of closing the bank account, your family might be in trouble. Now, do you think they need this kind of headache after facing such a devastating event?
 

Situation B: “But, it’s a joint account. He/she should have access to the money.” 



Many married couples think that they can still gain access to their joint account if anything were to happen to one of them. But NO, that’s not true - it’s a misconception. 
 

“How come cannot? He/she should be able to withdraw at least 50% what…” 
 

Well, yes, but it’s ILLEGAL. Again, the person can only touch your account until a court order is obtained because it’s frozen, remember? And, he/she shouldn’t be doing “SITUATION A” either. A Grant of Probate or LA is still needed to access the account.



Nevertheless, this situation can be avoided if there is a survivor clause in the agreement with the bank at the time you set up the joint account. It allows you to inherit the account automatically when one joint owner passes on. But unfortunately, not all local banks practice this clause.

So, can you imagine the obstacles your family needs to go through? After suffering a loss, they will also have to struggle financially, even though there are monies in the bank.
 

Which is why life insurance is IMPORTANT!



If you currently don’t have a life insurance policy, you aren’t alone. Based on the survey we mentioned earlier, at least 37% of the respondents DO NOT own any life insurance of any amount. A huge number of them (78%) said that they can’t afford life insurance. There are also some (11%) who felt that life insurance isn’t important at the moment.

Here’s the thing, life insurance is NOT about YOU. It’s a tool to protect your family from the potentially devastating financial losses that can result if you die prematurely or become permanently disabled. 

Looking back at the data we’ve gathered from the survey, the top 3 things that the respondents’ family spend the most on are food (44%), loans (32%) and childcare/education (14%).



By having life insurance in place, you’re enabling your loved ones to maintain their lifestyle, pay off any debts that you leave behind that would be a burden to your family and cover your children’s childcare/education expenses.

This is because a life insurance policy pays out the lump sum benefit once all the necessary paperwork e.g. producing the death certificate has been filed and approved. Upon your death or when you’re permanently disabled (most life insurance policies cover this), your family can be assured of the coverage amount that you had purchased. 

 

So, get life insurance today! PRUWealth Plus might be the solution for you

It’s an investment-linked insurance plan that provides high protection up to age 100 and for entry as early as 30 days old. To those who think that they can’t afford one - fret not, because it has a flexible premium based on your financial capability. 

Here’s an illustration to show how the plan can benefit you and your family.



For more info about PRUWealth Plus, head over to Prudential’s page here or contact your friendly Prudential agent. Don’t worry if you’re unsure of how much coverage you should be getting because he/she will be able to provide advice based on your financial needs and goals. 

ALSO READ: What Happens To Your Assets If You "GO" Without Leaving a Will?
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