The younger, the better 

“THE best thing about growing up is you get to manage your own life”. -- Anonymous 

 

I always look forward to being invited to speak before students on life insurance and investment. Have done this several times for both high school and college graduate students. Though these subjects are yet to be a part of the course curriculum, it’s good enough that some teachers have included them as mandatory topics for their graduating students. Perhaps they thought that having one or two sessions on the subjects will prepare the students on how to manage their money once they start earning. Though we know that this is not the ideal way to prepare the youth, it’s much better than having nothing at all. 

 

I have also observed a marked difference in the way college students are now appreciating the subject. In the past, very few showed interest in discussing money management. They’re just there for compliance. Sure they are excited to talk about earning and having their own income but not on the savings and insurance part. The latter is much farther on their priority list. I usually ask them the question, “On what will you spend your 1st-year salary?” Buy the latest phone or laptop, downpayment for a car and travel with friends are the usual top 3 answers. I can count with my right hand those who answered save, invest or buy life insurance. 

 

But of late, young people have a different appreciation of financial planning/management. They are more open and knowledgeable about it. Some are even into investing and already own their own insurance policy. It’s now part of the “adulting”, as the Gen Ys and Zs put it. This can be attributed to the fact that youth of today have more access to this kind of information via google and social media. Their increasing awareness of health and wellness, especially during this pandemic, also increased awareness and appreciation of the investment and protection products. 

 

This was confirmed by IC Commissioner Dennis Funa, when he said during an interview that Google had a study showing more and more people are now searching/researching on life and medical insurance. 

 

Why does it matter to start young? 

 

When you’re young, your insurance premiums are still lower. Getting life insurance at a younger age locks in lower premiums. That low premium remains the same throughout the duration of your policy. It will never change unless you add coverage. Until it went self-support last 2008, I was just paying P 7456/annually for the P1M coverage I got when I was 25 years old. The first policy I got for myself. Nothing compares to the insurance rates you enjoy in your 20s and 30s.

 

Aside from your age, your health is another factor considered when you get yourself insured. When you’re young, chances are you are much healthier and in good fit. It makes getting covered much easier, no hassle, and cheaper. There is no need to undergo those rigid medical and lab exams, no need to submit those medical records, and no additional premium rates due to medical conditions. Once you get those medical “hits”, which are often developed as you age, getting insured will not be that “too friendly”. Sometimes, you cannot be insured at all even if you want to.  My friend who got her first endowment insurance plan when she was 28 was paying around P 29,000 per year. After two years, she decided to upgrade her policy when she learned that she’s already diabetic. She was still insured but her premium increased to P 35,000 due to her current age and mainly because of the additional premium rating imposed due to her diabetes. The best time to get insured is when you’re healthy and you still don’t need it. 

 

Getting a life or investment insurance plan allows you to put protection in place for the future. Indeed, you may not have dependents now, but that will most likely change in a few years. Making that investment now means you’re setting up that protection in place when your spouse, children, or aging parents rely on your income.  A former colleague got a P 500,000 policy when he was still single. Never did he imagine back then, that he was already preparing for his “future family”. He passed away a little over 1 year after getting married, due to a vehicular accident. He left his very young pregnant wife with the insurance proceeds which can help her and their child start a life without him. Insurance is created for these unexpected risks and losses. If you wait, it may be more difficult and expensive to get coverage. Or it might already be too late.

 

Investing early and young means having more time in the market. Whether you invest in stock markets or mutual funds or investment-laden insurance products, time is your greatest ally. As they say, it’s not about timing the market but it’s having more time in the market. It’s about the power of compounding interest that one gets the longer they stay invested. To better understand the power of compounding interest, let’s use the “snowball effect” analogy, showing a small ball of snow builds upon itself to form a much bigger snowball as it rolls down a slope. The longer the snowball rolls, the bigger it gets. Imagine how much your retirement fund will be by age 60 when you start setting it up when you’re 25 years old compared to when you’re 40. This may even get you to your retirement goals faster so no need to wait for age 60... you can retire sooner. I was able to retire at age 53 because the savings and investments I made much earlier allowed me to do so. 

 

When you're young and just starting, life insurance and money management, in general, may not be your priority. But it should be! Many who have lost years in life have regretted not paying attention to these early on.

 

Let’s be mindful that being young has its own perks and advantages. But we will only be young once. You have the choice to live it the YOLO way or the Adulting way. The choice is yours!