Ask the Experts: Money, Insurance, Investing and Impact
Over the past 2 weeks we’ve been digging deep into the topic of money. Something I’ve learned from working with my clients is that our financial situation affects more aspects of our life than we might realise. It can put stress on our relationships, impact our confidence and shape our future.
Last week I spoke about money mindsets we need to let go of and cultivate to have a healthier relationship with our money. This week I am excited and honoured to be collaborating with Generali Insurance to clarify our fears around money, insurance, investment and impact…
I had the chance to interview Aline and Cornelia from Generali Insurance, Switzerland and ask them all the burning questions many of us have on our mind. Aline is in charge of the development of new insurance solutions and Cornelia focuses more on the investment side of these products.
What should I do with my money?
Victoria: So just to jump right in, a conversation that I've been hearing a lot around me has been: “I'm starting to put some money aside, I'm starting to make my own money, what should I do with it?” Not knowing what to do with your money can cause stress and uncertainty. Cornelia and Aline, what is your take on this?
Aline: So I think that the first thing you need to ask yourself is what are you going to do with that money? What are you basically saving it for? Because that will then define when you're going to use that money and the “when” is super important when it comes to saving or investing, because that will tell you how much risk you should take with that investment. If it's not super clear for you, I think in three buckets.
The first bucket is “I'm going to save a little money because you might need at some point” you know , the emergency bucket. It’s for when something comes up and you need to some cash at your disposal to repair your car, to buy a new laptop or whatever. When it comes to the first bucket, there is a simple rule of thumb. You should save in this bucket about two, maybe three monthly salaries.
The second bucket is for saving for something you want to buy at some later stage or do at some later stage. This is going to be money that you do not have now but you will need at some point. Of course you need to ask yourself; “is that going to be in one year, two years, five years or 10 years?” Depending on what you're saving it for, this will then determine in what you should invest it.
The third bucket is the money I want to put aside for when I'm retiring - so in a really, really long time for now. You can't really imagine, right? But you have to start now because the sooner you start, the less money you're going to need later on.
So these are the three buckets and really de determine what you're going to do with the money that goes into each bucket. So it depends on how much money you have at your disposal to invest; if you're going to start filling the second and the third buckets straight away, or first you need to fill up the first one, and then you may, I might go for a second one and then later on for the third one.
Victoria: And so would you say that in that first bucket is the priority for now? So somebody who is maybe just starting to put a bit of money aside, they're focusing for the time being on having that two to three monthly salary aside for emergency, and then once they have something that they're relatively happy with or comfortable with, they can start looking into bucket two and bucket three?
Aline: Yes, absolutely. I really fill it up the first one, and then it's done and you don't need to think about it anymore and you can take the box and think about other projects with other things to do with your money.
What is investing and how do I start?
Victoria: When we think about putting our money aside, there's always this idea that the money needs to grow. We don't want it to be stagnant, especially if there is any type of economic changes or political changes, and we never know what will happen to the value of the money... What is the importance of investing or can even give us a little brief on what is the concept of investing? Why is it important? Why is it something we should think about?
Aline: Yeah, I think it's a very important point for one reason. Investing means you're not going to let your money lie there on your bank account doing basically nothing. You're going to use your money. And so why is that important? You have to think of the interest, or let's say the returns, the compounded interest rate or the compounded returns. This is the important concept here, because we tend to underestimates that effect.
So let's say if you look at interest rates and you think “yeah, well, okay, I'm making 1% or 2% of 5% doesn't really change much” right? But actually it makes a huge difference.
Here again, there is a rule of thumb just to make it a bit more explicit when you invest an amount. You can quite easily calculate how long it's going to take for that amount to double, depending on the interest rate. So I'm going to make an example. Let's say, I want to invest 1,000.- Swiss francs today, and I leave it on my bank account, which typically has a 0% interest rate. You always take the number 72 and you divided by the interest rate and that's going to tell you how long it's going to take for your money to double. So for 0%, it’s 72 divided by zero is an infinite number… so it's never going to double. You knew that because with 0% interest rate, you're never going anywhere.
Let's say you are going to invest your money in a fund which has a bit of equities, a bit of bonds etc. and it's going to have a return of about 5%. That’s 72 divided by 5, the money is going to double in 14 years. So from your 1,000.- Swiss francs you are going to get 2,000.- Swiss francs, and this is why it's important that you're investing.
If you think about your longterm goals, you know that you need to save for old age. Let's say it doesn't matter which interest rate you're looking at. You know that you’re going to need, I don't know, 200,000 Swiss francs, but depending on the interest rate, it's gonna take more or less money to get there. So this is why it's important because it's going to get very expensive to reach your goals if you don't invest in money…
Cornelia: …and plus inflation is going to eat into your investments as well.
Victoria: Can you give us just a little brief for those who maybe don't know much about inflation - what that really is and why it can be concerning ?
Cornelia: Yes. Well, inflation is basically where prices are increasing from trading, for example, oil prices are increasing. Therefore it's going to cost more to fill up your car, it's going to cost more to pay for rent… Basically the value of money will decrease with higher inflation.
Victoria: So if you are putting your money in a bank account at a 0% interest rate, then the concern is that since things are getting more expensive, what you can do with that money is decreasing over time, right? So I guess that's the importance of the investment. Just a quick question, touching back on those buckets, you had mentioned right at the beginning Aline, that first bucket, which is the emergency bucket, are we putting that in an account at 0% since the goal for it to be money that is really easily accessible?
Aline: Yes, absolutely. You're totally right. In the first bucket it's not about making money, it's about having it there for whenever you need it.
Victoria: And then those are the second two buckets (the one where you’re saving for something specific and the one where you’re saving your future) - those are the ones where we want to be looking into investing and compounding?
Aline: Exactly. Here you're gonna look at the time until when you're gonna need that money and this will give you an indication of how much risk or translated in product that would mean how much equity share you should have in your portfolio and we're in whatever you're going to invest.
So this is also a rule in investing:
If you're looking at a time horizon of 15 years or more, you can go full in, into equity. So go into a hundred percent equity product or solution. Whenever you're looking at the timeframe below 15 years, you should decrease that equity share. And I think if you're looking at something that goes up to five years, then you should really have a very low equity share or, or no equity.
NOTE: More equity share = higher risk , lower equity share = lower risk
Victoria: So you could say that the longer term you're looking at it, the higher risk you can do that, is that correct?
Aline: Yes, this linked to the fears we have. I think the biggest fear when we talk about investing is around losing the money like; “oh, but what happens if there is a crash??” We've had some in the past, right? And unfortunately we're going to have some in the future too...so the important thing is that you have enough time or your money has enough time to recover from such a crash. So this is why, exactly as you were saying, you are going to look at the timeframe or the time horizon and adapt the risk or the equity share to that time horizon.
Victoria: So let's say giving a quick example. You would like to maybe buy some property in, let's say 10 years, the idea would be to have a bit of a 10 year plan where maybe you're putting a bit of money aside every month for those 10 years knowing more or less how much that will add up to in the future. Is that correct? How do you go about that specific scenario?
Aline: Yes. In that scenario you might already have an idea of how much money you're going to need, because you might think about buying an apartment or about buying a house and it needs to have a garden and a pool and whatever... So you might already have a budget in mind. Let's say from your side, you want to put down 50,000 Swiss francs for the property. You're going to go back and say; “Okay, but how much do I need every year?” So looking at 10 years, maybe 5,000 francs seems reasonable… You then go about, and you say; “Okay, I know I have 10 years to invest. I might actually go for a risk that is, let's say medium - or it's a 50, 50 solution (50% equities, 50% bonds).”
That's what you start with, but of course you need to keep in mind that at some point, you're not going to have 10 years left, you’re only going to have five years left - so you need to keep in mind that at some point you will need to decrease the risk in your portfolio. This is not something you need to do on a daily basis, but something maybe once a year reflect on and ask yourself; “Okay, but did this money change in the purpose I'm saving for and how long am I going to continue to save?” Once you get to a five years timeframe, you're going to reduce your equity exposure, etcetera. So it takes a little bit of active thinking and doing, but we're not day trading here. It's about setting it up and having your yearly checkup as you would go to your doctors.
Victoria: And is this something that you can get support on? I mean, you're both at Generali, is this something that you can go and see an expert and say; “This is my ten-year plan” and perhaps even decide ahead of time that every year we're going to decrease the risk or the equity to bond ratio by X amount? Is that something that is generally done?
Aline: Yes, you get in touch with a financial advisor. They will of course help you to set up this plan of saving, make sure that you stay on track with that investment and that the necessary changes are done. They will able to advise you on many more topics, not only on this one, but maybe also help you get the retirement things sorted - because we were talking about before, I think very few of us actually know how much am I going to need and what should I put aside. So these are all questions you can address with a financial advisor.
Biggest misconceptions & mistakes experts see with investing
Victoria: When we look at investment in general, what would you say is the biggest misconception when it comes to investing your money?
Aline: Well, I think one misconception might come from thinking you to have a lot of money to start investing, as if this is only something for the rich or something like that, but honestly you can start investing with really low amounts - and I think it's important you do! Do not wait until you have the big numbers to invest. On the contrary, start small, start soon, and really leverage on these compounded interest rate effect. Then maybe more mistakes people do when investing, I think something that people might forget is that, as in life, you should not put all your eggs in the same basket. The technical term would be diversification. So when you're investing into something, unless you're a professional in the area, you should really invest into something where you're actually not investing in one company, but in many different companies. The more companies you have in your basket, the lower the risk you take. If one company goes belly up, which I mean, it can happen even for big companies… So it’s important not to invest everything in one company, even if it's a super hype company of the moment, but really split your money over different investments. Now, of course you can go about it and start picking your own companies saying; “I want a little bit of this and a bit of that…” but that's going to take a lot of time, because somehow we need to decide in which company to invest and it’s also going to take a lot of money, because when you buy shares, you need buy one share or two shares or three shares, you cannot buy half a share. So typically for an investor starting in the field, I would recommend a fund solution.
The fund basically is nothing else in a bucket or a basket, or let's say it's like one person gathering the money of many different people, and then putting all the money together and investing together in many different companies. As a single investor, you're going to own a small portion of a company, but of many different companies, and this is something you can only probably only achieve through a fund. If you would go about investing directly, you would need much more money, so the fund is a good solution to go about that problem and solving that problem of diversification…
Victoria: And then also decreases the risk, correct?
Cornelia: Yes. Diversification decreases risk on your investments because it's not like you heard your colleagues talking about Bitcoin and they said “I made a lot of money on Bitcoin because I bought Bitcoin last year in autumn” and you go and buy Bitcoin immediately... That would be not so good because Bitcoin is very volatile and you could basically lose everything. There are different asset classes for different purposes and different risk profiles. So it's really important, I think, to leave it up to the professionals. One solution, as Aline already mentioned is a fund where it's a professionally managed. You have also then the option where you say either I have an active solution, meaning an asset manager is actively managing a fund, or you also have passive solutions where you have, for example, exchange traded funds. Those are funds that are just built in a market like in Switzerland, the SMI (Swiss Market Index). So you have ETF (Exchange Traded Funds) that is replicating the SMI with very low costs because it's passive meaning there's not actually a person sitting there doing the stock picking.
Victoria: So these funds are put together in the sense that a professional from Generali or from a bank will put together the funds with the companies that make the most sense in different percentages through algorithms?
Cornelia: That will be the ETF (Exchange Traded Funds). It’s a passive investment where you know the holdings of the Swiss market index, for example, and you know what holdings are in the index. Then you just create passive investment that replicates those holdings, and you basically have to similar performance minus a small fee and then you’re basically invested on the Swiss market. That's another way of investing.
How can I invest my money while having a positive impact?
Victoria: So then moving onto a slightly different but related topic, I'm always a huge believer in voting with your dollar. I always have this idea that every time you buy something, whether it be food or an item of clothing or an accessory or anything you're investing in the economy, right? You're choosing to support something and you're choosing to support the brand or the company in which you are spending on. How can we take a similar stance when it comes to investment and to really be aware of where we are putting our dollar?
Cornelia: Well, I totally agree with you.
Voting with our dollar is how we can little by little, bring about changes and we should never underestimate the power we all have as individuals. Consumers are the main drivers of a growing economy and the economy has to and it will adapt to consumer demands.
And that brings me to a little bit of what is a sustainable investment. In a nutshell, responsible, ethical, or sustainable investment combines investors financial objectives with their concerns about environmental, social and governance issues, which is the capital “E” environmental, “S” for social and “G” for governance - the so called ESG. Responsible investing is basically an approach to investing that aims to incorporate ESG factors (environmental, social, and governance) into investment decisions, to better manage risk and generate sustainable long-term returns. Let me give you some examples for environmental factors: it can be the CO2 emissions, the use of water, waste, biodiversity… A few examples for social would be something like a diversity and inclusion, health and safety, human rights, and for governance it's something like shareholder rights, remuneration of the management, transparency on reporting, internal controls or business ethics in general.
There's definitely a shift in interest we see and growing interest in sustainable investment. So Generali has decided to create a sustainable investment plan to meet the expectation of our customers. We have Sustainalytics as a partner to benefit from the expertise when it comes to the ESG factors and they are one of the leading ESG research data providers worldwide, and we work closely with them. And then our investment experts will apply some financial factors and put together an optimized portfolio for the Tomorrow Invest investment plan. And additionally, the plan also focuses on the “Swissness” which is increasingly invested in a Swiss company.
Victoria: Interesting! So it's really this combination between, as you said, working with these experts in everything that is ESG that are able to give some really accurate data on which companies are, let's say, having certain CO2 emissions or having certain environmental impact or social impact, etcetera. And then combining that with the financial aspect, so that we're able to invest in something that will not only give us personal returns, but we're also investing in the future, right? As you said, our huge power as consumers and we see it time and time again, just how the market is shifting in terms of what products are now more on the market, just from what people are purchasing…
Cornelia: Yes and it's driven hugely by the Millennials. They basically are the main drivers and customers for green products.
Victoria: Super interesting. And when it comes to the difference between let's say a more of a normal investment and sustainable investment, is the difference that in a regular investment it would be focused fully on the financial outputs and when you have the sustainable investment, you're really doing this combination of both where you're getting kind of the best of both words?
Cornelia: Yes. For traditional investments, their objectives is to meet some sort of financial goal depending on asset allocation, investment strategy or risk appetite. Whereas sustainable investments are investments focused around ESG criteria to integrate ESG criteria into investment decision process and there's many processes and many methods to do this.
For example, you can go via exclusion method. That means you exclude various topics such as a controversial weapons, tobacco gambling, fossil fuel extraction… Otherwise we have the best in class approach you can do where you choose the best companies within a sector or an industry. Or you can go into a steam based investing, meaning renewable energy, water, demographic changes, aging population…
But there is no standardized process yet on what sustainable investments are nor is sustainability a protected label or trademark, however, to avoid the so-called greenwashing of product and companies over the recent years, and in the years to come, we see more and more regulation on the market to ensure that companies do report on paramedics such as climate risks and CO2 emissions. The basic idea is to divert capital from public and private investments towards ESG investments.
Victoria: So would you say that over time, as there's been more transparency and regulations in terms of what companies need to report, has it become easier to really know what it is that you are investing in and really have a very conscious approach towards your investment?
Cornelia: Yes, especially over the past two years. You can really see that data is more readily available and companies do report on not only financial parameters but also on non-financial parameters. The research providers, they of course have to rely on the data the companies provide them with and the availability of data is widely available now.
Victoria: And you said that this whole movement was very much driven by millennials taking a more conscious approach to where they're putting their money and what they're investing in. Have you also noticed a difference in what people are asking for?
Cornelia: Yes. We have been looking at sustainable investments for quite a while now. I started working on it, it was, I think summer 2019 and the excitement back then was, um, limited let's say it that way. But now that we come out with our new Generali Investment Plan, we really see that people listen, they want to invest in something that is really not green-washed, but has a substance, meaning you have a partner that has the in-depth knowledge in all the ESG factors. And we will work with this partner and put that into place to integrate these factors into our investment process, which then again, is also a measure of risk.
You eliminate something, for example, a reputational risk. Just think of the Volkswagen scandal, then the value of the company decreases. So there's no dispute, there used to be, but there's no more dispute if sustainable investments are actually generating the same profits as traditional investments. It has been proven and we also have done our own analyzes where we can, especially last year in 2020, since the COVID 19 crisis, we truly see an outperformance in the sustainable investment field to traditional investments.
Victoria: So when it comes to somebody who really wants to take action in sustainable investment, and to maybe look at towards sustainable investment for bucket numbers two and three that Aline mentioned, how can they go about looking into the sustainable investment? How can they start?
Cornelia: Well, first of all I would say sustainability generally is looked at as a long-term prospect. Unfortunately, the world will not be changed overnight, therefore sustainable investment, if you're interested in it, then have a long term investment outlook. So as I said before, at the moment you can call the product you offer to people sustainable or ESG as an ESG product because there's no regulation around it yet, but more and more regulation is coming up. There was just one regulation that came through on the 10th of March where all companies have to disclose a non-financial data by June this year and commit to it - but a lot of companies do that already.
So that is from the responsible investment point of view, but there's also the company point of view where you look at the company you buy the financial product from, for example, what is this company doing in terms of Corporate Responsibility? Because at the end of the day, on a social aspect, companies have a big impact. For example, at Generali we have the human safety net where it's kind of a charity and I myself are involved in an entrepreneur program where they work with migrants who want to be entrepreneurs and they help them. I'm mentoring one of these entrepreneurs. And I think Generali Switzerland is doing a great job with Corporate Responsibility as well. So look at the company's website where are you buying the products from also to see what is their corporate responsibility…
Aline: …and maybe going back to your point, Victoria , you were asking before “how do I go about it as an investor if I want to invest in something sustainable?” I think the fund is actually a good solution because you’re going to delegate the problem of choosing the right companies to invest in, you're going to delegate that to the people managing that fund. The only thing you need to do is look at the fund and look at what the fund manager is telling you they are doing, because they are obliged to tell you “I'm selecting the companies based on this and that criteria” and if this makes sense for you, well, you can go about and invest into that fund. They are then going to do the hard work for you to then select the single companies to invest in.
Victoria: That makes perfect sense as well, because as we spoke about there is the possibility of green-washing and thinking that a company is either a safe long-term investment financially but then also how do we know they doing the right thing? Are they following the right criteria? Do they have the right policies in place?
Biggest fears when it comes to investing explained
Victoria: So we spoke a lot about risk and Aline earlier you had mentioned fears. What would you say are some of the biggest fears that clients usually come to you with when it comes to investing? So I know that money can be a bit of a scary topic, it can be a bit taboo, it can bring up a lot of insecurities and uncertainties within us… So what would you say are some of those biggest fears?
Aline: Well, I think we're all afraid to make mistakes, right? So it's thinking: “okay, I have this money, but I just don't know what to do about it…and if I do something, I'm afraid to do the wrong thing.” So here's some tips around that and then it probably depends on how much time you want to spend thinking about doing the right thing or not…
So if you’re thinking: “okay, I want to really understand all this stuff myself.” Then there’s so much information you can get on the internet on different websites. On our website you can find lots of practical guides that give you an overview for example, on the topic of investing: what are the different solutions out there? How do shares work? How do bonds work?
But if you don't want to spend so much time on that, well, probably the best way is to find yourself in an advisor that will guide you. And that will go through with you through your objectives, through your budget, and then find the right solution to the one that will fit both aspects of it and find a solution that matches your risk profile.
You’ll find extra free resources at the bottom of this blog post.
Victoria: Yeah, those are some great tips. When it comes to those fears, if I take it more from a coaching perspective, a lot of the time when there's something that we're maybe uncomfortable with or scared of, we tend to avoid it, but that does nothing, but make it worse. Sometimes simply, you know, getting a little bit more perspective, speaking to somebody that you trust and actually talking about the topic, being vocal about your concerns, being vocal about what those fears are, then that all of a sudden can make things seem a lot less scary as well.
Aline: Absolutely.
I think it's actually a shame that we do not speak so much about money with our family and friends, because I think that there would be a lot of things to learn from each other. On the other hand, my personal experiences, if you bring the topic up and you say “but how are you doing? Is this something you can recommend?” Then people are actually quite open to share their own experiences and this is a good starting point.
Victoria: When it comes to money there also tends to be a lot of beliefs, as you said, I need to have lots of money in order to invest, or I'm just not an investor, or I don't know anything about the stock market, or I'm bad with numbers, things like that. There's so many beliefs that are very hard to separate ourselves from. So I like the idea of even just going to speak to an advisor, maybe even opening up to your friends and family and remembering that you're not the only person to have concerns around money, you're not the only person that fears around money…If you go talk to an advisor , they've probably heard everything you've said a hundred times before.
Tips on how to invest with a positive impact
Victoria: When it comes to investing in general or investing with a positive impact, what would you say are your biggest tips?
Cornelia: I'm a true believer that everyone should have some level of financial literacy. If you ask me, I would even suggest to have that as part of the curriculum in schools because I think it's really important. There's no around it when trying to achieve any financial goals and stability, especially in the future, the longterm goals, not only the short term goals. In regards to the positive impact, it wasn't a short process, it was a long process of creating our Generali Tomorrow Invest Investment Plan - to have something in our offering that we truly believe in and can stand by that this is a sustainable solution where you can generate good returns.
Victoria: And just a tiny bit deeper into that generally investment plan. It's essentially a plan, which as we said before, brings in those ESGs with the long-term financial benefit and combines that with this basket where you really have a lower risk because you're investing in many different companies at once. Somebody who, let's say, is just starting to earn a little bit of money, is this the right place to start? Or should they first have that kind of financial literacy or first look into other options?
Cornelia: Right now, is my opinion because professionals are actually managing this investment plan and the fund behind it. additionally, we use also the in-depth knowledge and experience of our research data provider Sustainalytics. So it is professionally managed with people that have extensive number of years of experience in both criteria. One is how to manage the assets and also how to implement the risk that ESG risk factors into the portfolio as well.
Victoria: So this is something more for long-term, right? How long term is long-term, what would you say is maybe the minimum amount of time in which you should be considering putting your money into this kind of investment plan ?
Cornelia: Well, we have done an analysis generally on the global market, looking at volatility on the market (meaning all the ups and downs) and our analyzes has proven that if you have an investment horizon of 15 years or more then you will have a result of a positive outcome of your investment, no matter what sort of crisis may have occurred.
Victoria: And there's no minimum amount of money you need to have in order to invest into this?
Cornelia: Not for the Generali Tomorrow Invest it's offered via life insurance a solution.
What is life insurance and how does it work?
Victoria: So how does that life insurance solution actually work? Let's say concretely month to month…
Aline: So the investment solution, well you can, you can actually buy it as a standalone and so what you will get is these shares of that fund. As Cornelia was saying, you need to have a look at a 15 years of investment horizon to make that work. Now, if we're looking at the life insurance side, you're going to buy a life insurance and the part of the life insurance, which is about savings, it's going to be invested into that fund. Here in life insurance, typically you're going to buy a life insurance in the pillar 3A, which you might know is the tax advantaged saving product in Switzerland, so typically these are even more long-term investments because a 3A solution you're going to keep until the age of retirement, so you're looking at, I don't know, 30-35 years of investment.
What differentiates life insurance from pure investment is that over these 30-35 years on top of growing that saving pot, you're also going to get some coverages for disability and death. So if something happens to you, your family or whoever you want the money to go to is gonna be covered. This is the main difference between investing directly in the fund or then going for the life insurance. Generally people come to an insurance company because of the protection factor.
Victoria: In this case, there's both, there's the life protection factor and then there's also the rest of the money is being put into this fund. Is that correct?
Aline: That's correct. Protection and saving.
When should I start thinking about saving for retirement?
Victoria: I wanted to touch on maybe two last big points before we wrap up one would be around retirement. First of all, something that I find so interesting is the changing of the way that retirement is working. When we look at previous generations, they've been able to really count on money that is taken out of their salary for their retirement but I think that that's changing as people are looking to change jobs more frequently and therefore aren't maybe as able to count on that retirement. First of all how do you see the changes in the way that retirement is going, and when should we really be thinking about our retirement as, as young people, when is too young to think about it or should we start straight away?
Aline: Well, let me first take your first point around what's changing…I think you're right. I think the money we're getting out of our employee benefits and also out of the first pillar which is the social security , that money is decreasing simply because we all live longer, right? So it takes more money to finance that retirement age. So money is typically going to those who are already retired today and less to the ones that are working. This means that you’ve got to save more for yourself if you want to keep up your way of living.
When should you start thinking about retirement? I mean, it's so abstract, right? This concept of retirement…when you're 25 or 30 years old it's so far away, so I say; don't think too much would be my tip.
Just do it, just start saving, start putting some money into that third bucket, even if you don't know yet what exactly you're going to need it for or how much it doesn't matter, because the earlier you start, the more you're going to get out of it and the less you're going to need to fill up some gaps later on. So don't think too much, just do it.
Victoria: And if that's something that a financial advisor can also give you some advice on, right?
Aline: Exactly, they will go through an analysis showing you, what are the projected money you're going to get out of the first pillar, the second pillar, and what's going to be more or less you need at retirement and how much you need to put up yourself, but there's going to add up to some quite big numbers and you're going to be like “Whoah!” but the point is that you don't need to cover everything. Again your advisor will also look at: what are you able to save right now? You might be at the very early stages of your career where you're making some money, which is great, but you're not able to save thousands on the Swiss francs yet this will come later on. But anyway, it's important even to save a few hundred francs a year because this will help you for later on.
How can I set myself up financially when I have my own business?
Victoria: And one last point I wanted to touch on is around having your own business. There's this growth also people who are looking to be independent, of course then that impacts your financial security. So what is the best way to secure a healthy financial future for yourself if you are independent or looking to be independent in the future?
Aline: Well, the difference between an independent and someone who is actually employed is that there will not be a company helping you save for retirement, right? So as an independent you're going to need to come up for that part, not only in terms of savings because typically in this second pillar, you're going to also save for retirement. But a second pillar also provides some protection that if you get a disability and you are not able to work anymore, it's also going to pay you a pension. So these are also risks that you will need to cover yourself for.
Here typically a life insurance solution, which is combining the saving and protection pieces can be a good solution. And again, an advisor will help you find out the right way forward for yourself, but you have an even bigger responsibility as an independent to take care of your financial future. So if you're planning to, or you're already an independent, take care of it, really do it.
Victoria: And you would recommend that life insurance solution, where then you're covered on all aspects and you really have something that you can lean on because you know that you don't have an employer that you can maybe count on for those things?
Aline: Yes, absolutely. I mean, it's not the only solution out there, right? There are many ways to get about it. Life insurance allows you to combine both. Of course you can go about and buying the protection on one side and then saving somewhere else or even combining all the three, so that really depends on your own personal preferences and where you want to invest, etcetera. An advisor is certainly a good investment here to help you see clearly through all that, because that's quite complicated as an independent to figure out what you really need.
Cornelia: As Aline has explained it, you see there is flexibility in terms of products and what products are out there you just need to find out what suits you.
There is a solution for everyone.
Top tips on money from financial experts
Victoria: If you were to give one little word, one little sentence of advice for somebody who maybe is listening to this feeling a little bit overwhelmed and feeling like: “okay, I know I need to start somewhere, but I'm just a little bit scared.” What would you tell them?
Cornelia: I would tell them, don't be scared. You have to start at some point and you rather start sooner than later.
Aline: Absolutely, don't be scared.
We're only scared because we don't understand. There are so many resources out there that can help you understand if you don't want to feel ready to go for a financial advisor, then read some stuff, go on our website for example, there is a lot of contents there that explain all these aspects we've talked about and this can be a good start.