How much term life insurance should a fresh graduate have?

I don't know if it is a trait of Asian families but it seems that there are certain topics related to money which are taboo. 

I know my family generally don't like to talk about death and insurance, for example. Maybe, it is considered inauspicious but I don't care. I will talk if I think it is necessary because I do care.

When a reader sent me an email with regards to one of my blog posts about what I think young graduates might want to do to get their personal finances in order before thinking about investing money in the stock market, I said the same thing.

As we grow older, our parents grow older too. They will retire one day and might depend on us for financial support. Buying insurance on our life is for our dependents. So, it is important to talk to our parents about insurance and what we are doing for them if they should be dependent on us. They have to know.

In that blog post the reader referred to, point number 1 was:

1. Buy a term policy. Very important if we have parents or other dependents to care for. How much should the coverage be? It is up to you but I feel that $500K is probably more than adequate for most. (See related post number 1 at the end of this blog post for the full article.)

He wondered why I thought $500,000 was probably an adequate amount for a start? There is a very simple reason.

In case the insured (i.e. the fresh graduate) should meet with an untimely demise, each parent would get $250,000. 

If the parents were financially prudent, they would use the money to buy an annuity each. There could be a 5 year or 10 year accumulation period but if the annuities were worth their salt, they could provide a monthly income of $2,000 or more for each parent. 

Sounds good?

This is how that $500,000 paid out by the term life policy should be utilised, in my opinion.

Unfortunately, not everyone is financially prudent. $500,000 may look like a big amount of money but it could disappear very quickly in the hands of the less prudent. 

Then, there are people who are at the other extreme who might just put all the money in a fixed deposit or a few which is better than squandering away the money but it is still far from ideal.

So, although possibly losing their child is not something parents want to think or talk about, we have to talk to them about it at least once and tell them what they should do with the money paid out by the insurance company if the bad thing should happen. 

I believe that talking about it will ultimately give everyone a peace of mind.

The sooner we do it, the better.

Related posts:
1. Take steps towards financial security.
2. Financial freedom is a family affair.
3. An annuity proposal: A case study.
4. Free medical insurance in our old age.
5. What is our attitude towards having children?

Accordia Golf Trust: A hole in one.

I bought more this morning when the counter broke out of resistance:



In the afternoon, I closed my positions:

What if the unit price were to go higher? 

I would congratulate those who are still holding.




Won't I feel any regret? 

I might complain about it a bit but it would probably be in jest. 

What? 

Why won't I feel any remorse?




I always try to remember my motivation whenever I initiate a position. 

If the outcome matches my motivation, that is good enough for me.

Why should we feel sad if things turned out well in the way we had hoped they would?




Related posts:
1. Accordia Golf Trust: Blood in the golf course.
2. Motivations and methods in investing.