Planning for Dependents (I)

Planning for dependents is an integral part of financial planning and wealth management. Our dependents have needs that we as responsible guardians need to make adequate provision for. There are six major ways we can make the financial future of our dependents less burdensome – education planning, health management, life insurance, estate planning, retirement planning and financial literacy.

Dear Prof Sagay

Education Planning – All parents want the best for their children and education comes at the top of many lists. In Nigeria, where there are very few scholarships, bursaries have become extinct and the students’ loan system has crashed the onus for paying for a child’s education falls on the parents.

Many people are able to pay out of pocket for primary and secondary education but find university education particularly challenging especially when we are forced to choose private universities instead of public ones because of the frequent interruptions in the calendars of public universities – the ongoing ASUU strike is a sad reminder. The solution to this is an Education Plan from an insurance, asset management or trust company.

This plan enables the parent to save in small amounts monthly (or as you choose) over a long period of time towards the education of the child. The money is then paid when the child starts university and reduces the amount of money the parent has to part with at that time. A plan from an insurance company has the added benefit of full payment in the event the parent dies before contribution to the plan is complete.

Many parents start the plan off with cash gifts given to the child at her naming ceremony. An education plan not only provides financial freedom for the parents, it enables the child to have options and choose a preferred university without worrying too much about cost.

Shop around for a good plan, compare rates of return and any added benefits. Also, do a comprehensive due diligence on the plan provider to ensure the company would still be in existence when your child enters university. This due diligence must be repeated periodically over the course of the plan.

Health Management – Some of us are blessed with jobs that provide healthcare for us and our dependents. For the rest of us, there’s a need to make adequate provision for our healthcare. With the introduction of the National Health Insurance Scheme, came the Health Management Organisations (HMOs).

These have introduced different healthcare plans with value-added services. From as low as N3, 500 per month, comprehensive healthcare can be provided for a family. However, there are many reports of sharp practices so we must do our due diligence on HMOs and compare plans before we commit.

There’s an HMO that provides telemedicine services that allows its clients to receive medical consultations from its doctors in the comfort of their homes via their mobile phones. This removes the stress of going to the hospital and waiting to be attended to. With the easy payment models and creative value-added services, we have no reason not to provide comprehensive healthcare for our families.

Estate Planning – If you own anything of value that people you love could be interested in, then you are a candidate for estate planning. A friend of mine gave out all her dead mother’s clothes to charity, only to have her aunties come in and chastise her for her generosity. She was surprised at the accuracy of their memory in remembering individual items of clothing that her mum had.

Estate planning – the efficientt distribution of an individual’s property in line with that individual’s priorities and objectives. It pputs you in control even after death, ensures correct and timely distribution of your property and gives tax planning advantages. For those of us with young dependents, timely distribution is very key to their maintaining an uninterrupted lifestyle Reliable and faithful guardians must also be appointed for our young dependents.

Meanwhile, wills must be updated with the acquisitions of large assets. Some may think that writing a will is morbid and is an invitation to death. If that is the case, those who have no will would never die, but they do, and we see the messy situations that follow the death of some of those people.

If you want to be in control even after death and ensure that the distribution of your assets is done as you would have done it yourself, then you must ensure you do the necessary estate planning.