Your Money: Life insurance helps focus on long-term goals

December 21, 2020 12:30 AM

Investing in long-term instruments during your earning years helps you save more and get the benefit of compounding

insurance rulesWith the pandemic wreaking havoc, the need of COVID specific coverage was needed to provide customers with some semblance of financial relief. Representational image

The Covid -19 PANDEMIC has turned the year 2020 into a challenging time for all of us, bringing in months of uncertainty. While some of us curbed discretionary spending on account of income loss, pay cuts or deferred payments, some have cut down spending thinking about the unforeseen times in the near future. This shift in spending pattern has led consumers to shift focus from long-term goals to their short-term problems. Such uncertain times have also spurred people to take hasty financial decisions that adversely impacts their future finances.

Future contingencies

Planning for the long term equips you to be prepared to tackle unexpected contingencies in the future. And when it comes to thinking long-term, insurance can be one of the preferred ways to ensure financial security. Life insurance plans offer various relevant benefits, with some policies even offering whole life coverage.

Investing in long-term instruments during your earning years helps you save more. This is a more prudent move than putting off your investments for later when you’re past your career prime. By then, it may be too late to aggressively invest and save for retirement.

Time to grow

It is no secret that money grows more over the long term. The earlier you invest, the more time your money has to multiply. But you have a very valid concern, during challenging times like these how can you take a long-term approach when there are more pressing concerns? That’s true, but you can follow a systematic investment approach wherein you invest small amounts over time. This lets you buy more units of an investment when prices are low and less when they are high, and in turn, it averages the cost of your investment.

Focusing on long-term goals pays off because when you get through the short-term crises and emerge at the other end, you’ll have a future that’s well-planned. When the tough times induced by the pandemic make way for a newer and better normal, you will be glad you did not lose sight of your long-term needs.

The writer is chief distribution officer, Institutional, Bajaj Allianz Life

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