Emergency funds: Have joint savings accounts.

Someone wrote to me and said,

"Even with passive income, your representative will have to wrestle to get your affairs settled.  This takes both time, effort and even some muscle power.  My greatest fear is being poor and going to bed hungry. My next greatest fear is being half-dead.  Sigh.  .  . I worry a lot."

I have a simple solution to this. What is it?

Have joint savings accounts with our loved ones. I have two such accounts, one with my mother and one with my sister. In case I were to be incapacitated in any way one day, they have access to the money in these accounts.

As adults, we naturally want to have a clear line separating "my" money from "your" money. After all, we have our own lives to build and our own dreams to chase. However, having at least one joint account with someone we love and trust really makes sense.

For example, I know that many couples, married or not, have joint savings accounts to which they contribute equally on a regular basis. Such joint accounts could serve many purposes including paying for regular household expenses.

However, the joint accounts I am thinking of hold emergency funds. They come in an imaginary glass case that has the words

"BREAK GLASS IN CASE OF EMERGENCY"

written on the outside in bright red colour.

Having said this, for married couples, a joint account to hold emergency funds makes sense. For couples yet to be married and for singles, it would make sense to have such a joint account with a trustworthy immediate family member even if the money is all yours. (At this point, I hope no one asks me the question which I think someone might ask.)

Yes, we need to have people we can trust to hold keys to these funds. We trust ourselves (I think) but if anything untoward should happen to us, someone else we trust should be able unlock these funds on our behalf.

Still having second thoughts? Hey, this someone we trust and love will be taking on additional responsibilities (with thanks and only thanks), you know?

What's the next thing to do after this?

Keep our fingers crossed and hope that we are the ones who might have to break the glass case and not them.

P.S. There are many ways to make sure that our loved ones have access to our money on short notice, I am sure, and I am just sharing one way here. (See related post #3)

Related posts:
1. Why a meaningful emergency fund is important?
2. Emergency fund: How much is enough?
3. Emergency and convenience cash.

Whole life insurance, universal life insurance and investing.

"It is a horrific investment!"

This blog post is actually a reply to Kenneth Chua, who left very thoughtful comments regarding how whole life insurance has worked for him: here.

Since not many readers visit the comments section, I thought I should bring the comments section in as a blog post especially when I believe I have something important to talk to myself about:


Hi Kenneth,

Yes, times have changed and there are many more options available to us now in Singapore to help us plan for retirement.

When I am in my 60s, I could be amazed by how things might be different just like how my parents find how things are more complicated nowadays compared to the time when they were in their 20s. Life was simpler then.

Well, we are lucky that we have a paternalistic government who, most of the time, do the right things. We still have to try to grow our savings to ensure retirement adequacy on top of what the government is trying to do for us.

With Singapore's core inflation at about 3% per annum, the whole life policies which I have are only tracking inflation with returns of about 3% per annum. While it helps to know that my wealth is not shrinking, it is not growing either.

When the time comes to draw upon the policies (i.e. cashing out at 65 like you said), the sum of money would start shrinking rapidly, both in nominal and real terms due to its utilisation and a lack of growth.

A solution would be to buy an annuity then but, of course, the money would be locked up again. Although most people would not like to have their money locked up, this is a good hedge against longevity risk for people who are not investment savvy.

For me, however, the better solution is to ensure our wealth grows at a faster rate than inflation and the sooner we achieve this, the better. Apart from saving a good portion of our earned income from active employment, investing in income producing assets that will grow in value is my preferred method.

The nice thing about this is that when I reach 65, I wouldn't have to cash out. Hopefully, these assets would still be generating income for me and this would help fund my retirement till my final day in this world.

Thanks so much for sharing. Keep the comments coming.

AK

I also replied to another reader on Universal Life Insurance recently. If you are interested in this, please read comments: here.

Related posts:
1. Inflation! What to do?
2. To retire by age 45, start with a plan.
3. The best insurance to have in life.
4. An annuity: A case study.
5. Matthew Seah explains Blue Chip Investment Plan.

"The amount that is going into insurance goes up every year and the amount that is going into investment goes down every year. This doesn't work. It is a way of investing money poorly."