Financial stability is not only earning well but also preparing for life’s uncertainties to avoid financial strain. It is therefore necessary to set aside money to cushion against potential risks to provide a safety net and ensure you remain financially secure.
An emergency fund is a critical financial reserve set aside to cover essential expenses especially in the event of job loss. It is advisable to save at least three to six months’ worth of living expenses in a readily accessible account. This fund provides a buffer during periods of unemployment or other financial emergencies, allowing you to maintain your standard of living while searching for new job opportunities.
Delayed salaries cause financial strain, particularly if you rely on income from an unstable job environment to cover your expenses. A sinking fund is a designated savings strategy where you regularly set aside money to cover periodic expenses. Unlike an emergency fund, which covers unexpected events, a sinking fund helps you manage anticipated expenses. This fund ensures that your bills are paid on time, even if your paycheck arrives late.
Health insurance is essential for protecting yourself and your family from high medical costs. In Kenya, various health insurance providers offer plans that cater to different needs and budgets. By investing in a comprehensive health insurance plan, you can access quality healthcare services without risking depleting your savings or going into debt.
Life insurance provides financial support to your dependents in the event of your death. It ensures that your loved ones are financially secure and can maintain their living standards. Life insurance policies offer various coverage options, including term life and whole life insurance. It protects your family’s future and provide them with the financial resources they need to cover expenses such as mortgage payments, education costs and daily living expenses.
Planning for retirement is essential to ensure that you have a stable and comfortable future. An Individual Pension Plan (IPP) allows you to save for retirement and accumulate a large savings build-up over time. By regularly contributing to a pension plan, you ensure that you have sufficient funds to support your lifestyle and enjoy a fulfilling retirement.
Financial cushioning is about smart and strategic planning. By building an emergency fund, setting up sinking funds, securing insurance and planning for retirement, you create a safety net that protects you and your loved ones from life’s uncertainties.
