| Other Funds Planning |
Below is a listing of the types of funds that one may set aside in financial planning, in addition to the ones that most people would regard as essential, i.e. the retirement fund, the education fund, the medical fund and the emergency fund. The listing is not meant to be exhaustive.
Living Income Fund The income earning ability of a person can be cut off by the loss of a job or by temporary or permanent disability. |  |
The living income fund is set up with the objective of providing cash flow in place of the discontinued income stream to support the person's living costs for an intended number of years.
In most cases, living income is provided for through the purchase of life insurance with personal accident and illness/disability riders.
Survivor Income Fund
The ability to earn income is one of the most, if not the most, valuable asset that a breadwinner may have. The income stream often represents the lifeline for dependants if wealth is not sufficiently built up.
Survivor income fund refers to the fund set aside to serve as replacement cash flow for dependants in the event of the death of a breadwinner. This amount is generally represented by the number of years of dependants' living expenses (taking into account inflation) that the breadwinner intends to set aside. Where a child is involved, it may be the number of years until he/she finishes tertiary education.
More often than not, survivor income is provided for through the purchase of insurance. For a relatively small outlay when one is young and unable to build up wealth quickly enough, the dependants are protected through death or disability benefits equivalent to the targeted sum, in the event of premature death or disability of the breadwinner.
Holiday Fund
Usually, this refers to a major holiday abroad that is taken once in several years rather than the incidental or local holidays. Sometimes, it is a revolving fund built up from regular savings, from which monies are taken for a major holiday and the fund is rebuilt with fresh savings for the next holiday, and so on.
Special Purpose Fund
There may be certain financial objectives, though not essential or of imminent use, that one may want to set aside a fund for. For example, one could set aside money as a gift for the wedding of an offspring or for a house extension or a trust fund for a handicapped child.
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