Posted by: admin : Category: The term financial planning is used in any context in which people are asked to think about their future financial needs. One common example, applicable to almost everyone, is a pension. Almost everyone eventually stops working in their later years and will have to subsist without an earned income for the remainder of their lives. In many countries, governments offer some support to their citizenry through a state pension. It is extremely common, however, for people to make private pension arrangements, either to supplement or replace the state pension. In general, pensions operate on the basis of small contributions being made regularly over a long period of time. Those contributions are usually invested and, by the time the contributor reaches retirement age, should have produced a sizeable sum which can either be taken all at once or used to produce a stream of regular small payments.
Financial planning also involves taking account of possible changes in a person’s financial situation in future, resulting, for example, from a loss or interruption of employment. Insurance against unfortunate contingencies is available for purchase and can help mitigate the dangers of uncertainty. Another contingency which can be both financially draining and predictable is the need to pay tuition fees for children. Special savings accounts designed to help people prepare financially for the need to pay school fees exist and this is another example in which careful advance planning can smooth over any financial difficulties.
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