Funeral cover (#150)

The sad thing about the work we do is that it has a 0% sexy rating. Once you understand the five financial concepts we keep harping on about, it becomes easy to figure out the rest. The things we invest in won't make you rich overnight. If it did, we would be sipping champagne cocktails on a beach, not talking about the five financial concepts a hundred times a day.

However, the work we do here will hopefully help you identify poor financial choices before you make them. This week, Karabo shares the story of her grandmother's funeral cover. All hell broke loose on Twitter after I posted about it. The feedback was either, "If her grandmother had died in the first month it would have been a great idea to get funeral cover." Or, less kindly, "Funeral cover is a scam."

This week, we offer ways to think about funeral cover. It's an insurance product, and insurance plays an important role in financial management. However, like all other short-term insurance, there comes a time where you have to stop paying for it. The sunk cost fallacy makes that much harder in funeral cover.

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Karabo

My grandmother passed away recently. I found out from my mom that for the past 13 years she's been contributing R250 towards a funeral policy that paid out R10,000.

When I do my own calculations, if she had simply saved without any interest earned, she could have saved R39,000.

She's trying to convince me to get a funeral policy but I'm not buying the maths as a funeral policy would only work if a person dies in a few months.

Is there a way of saving money that can earn good interest as a death insurance for family members without taking out a funeral policy? How can I convince my mother to consider alternatives to funeral policies?

Andy

Was listening to your "What the Fee" episode (March 10th) and wanted to let you know that Ucount rewards can actually be redeemed as cash. (Nothing against Playstation VR, but I am an XBOX guy)

I racked up about R9,000 worth of Ucount over five years and received an expiration notification. I redeemed R8,000 and put it into my investment properties bond.

What you have to do is redeem the points into a pure save account (terrible savings account), from there you can transfer it where ever.

I see they also have options to put it directly into a TFSA etc. They can only be redeemed in R2,000 increments.

I currently contribute a total of 10% of my salary to my RA which is compulsory at my work. (my work pays 50% of my contribution, so 5% myself and 5% company).

My company has chosen to use Allan Gray and we have some Durban-based advisors.

The actual Annualised return since inception has been 1.72% and over 3 years 1.74%.

The admin fee, platform fee and advisor fees comes to 2.66%.

I would love to max out the contribution to 27.5% but I don't want to put it into that RA. What options do i have here? Do i have to negotiate this with my company or can I open a separate RA and contribute 17.5% to ETFs?

Lalitha is 59 and she has a nice lump sum to invest. She thinks she'll probably retire at 65. She already has a tax-free account. Where should her money go?

Beyers

What is your opinion about keeping a portion of your emergency fund in Kruger Rands as a currency hedge?

How are Kruger rands taxed when you sell them?

Milan

On Sygnia's platform you are able to buy Sygnia ETFs in a RA wrapper. The net result is one of the cheapest RAs you can get at the moment. I have attached a breakdown of my fees. The EAC is just 0.41%

There is also a check to make sure you are Reg 28 compliant. You do not have to invest in bonds or cash to be Reg 28 compliant. Your portfolio can comprise of just Equities and Property. If your custom portfolio breaches Reg 28 allocation rules you have 12 months to fix it.

Anne

I am trying to teach my kids to save money and buy shares with their savings. My son insists on buying gold shares. Is there any etf with the word "gold" in that could be a good long-term investment?