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Creating a financial backup plan
Your unique plan to protect yourself and your loved ones if the unexpected happens.
Planning for the unexpected
Having a financial backup plan in place can give you peace of mind and confidence knowing that should the unexpected happen, you have a plan to rely on.
Your backup plan is unique to you, and may include current savings, superannuation balances, debts and assets, and insurance cover.
Creating a backup plan can be easy to put off, so we’ve created a handy checklist to get you started.
There are a few key questions to ask yourself when ensuring you have an effective backup plan:
- Do you know what you would do if you suddenly became ill or had an accident? For example, do you have savings you could access, assets you could sell or family / friends you could ask for help?
- If you were to pass away, could your family continue to meet their financial commitments?
- Do you know what your super balance is and whether you have insurance attached to your account?
- If you have insurance via super do you know what events are covered and how much can be claimed?
- Do you know who is the beneficiary of your super balance and life insurance if it is included?
- Aside from your monthly mortgage repayments, have you considered how you would cover living expenses, car repayments, school fees and the like if your income was to stop?
- Do you have other forms of insurance like stand-alone life insurance, income protection, total and permanent disability, or involuntary unemployment? If so, do you understand what you are covered for in the event that you need to claim? Will this cover your mortgage repayments?
- If you are relying on family assistance, have you spoken to your family about this?
- Do you know how much sick leave you have or what happens when it runs out?
If you are unsure, or have answered ‘no’ to any of the questions above, it might be time to have a closer look at your financial backup plan.
Grow your savings
Putting money aside in an emergency fund – e.g. via an online savings account, term deposit or offset account linked to your home loan – can help you manage through periods of financial difficulty.
Learn more about saving for an emergency fund.
Pros
- You can generally access savings at short notice (may be break costs with term deposits)
- You can make regular contributions to grow savings gradually
- Keeping your savings in a home loan offset account can reduce the interest you pay
Cons
- Low interest rates on cash deposits limits growth potential
- Savings alone may not be sufficient to cover major expenses or loss of income
- If the unexpected happens soon you may have not yet accumulated enough to cover your needs.
Grow your super
Making additional contributions to your super can help you grow your retirement savings faster, which may be able to help you meet your financial commitments if the unexpected happens.
Learn more about growing your super.
Pros
- Tax-effective environment can help money grow faster
- You can make regular contributions from your pre-tax income to grow your super gradually
- Making before-tax contributions to super can reduce the amount of tax you pay
Cons
- You need to meet certain eligibility criteria to withdraw money from super and the process could be slow
- Accessing your retirement money early means the amount you will have in retirement will be reduced
Invest outside super
Investing in assets like shares, ETFs or an investment property offers the potential for capital growth and income (e.g. dividends or rent), which can help you build a financial buffer for the future and could be sold in the event you need emergency funds.
Learn more about building your wealth through investing.
Pros
- You can potentially grow your money faster than cash
- You can choose from a wide range of investment options, including direct shares and property
Cons
- Potential for negative returns, especially in the short term
- You may need to sell investments at an undesirable time (e.g. when share prices are down)
- Some investments may take time to sell and access your cash (e.g. property)
Protect with insurance
Insurance can provide an additional source of funds to help repay debts and cover medical expenses if the unexpected happens, which can help to protect your current lifestyle and retirement plans.
Pros
- Helps you avoid spending your savings and/or selling your investments
- Insurance premiums can be relatively small compared to the potential payout
- You can choose a level of insurance that suits your personal situation and budget
Cons
- You may not experience a claimable event
- Insurance premiums tend to increase over time as your age-related risks increase
- If your insurance is in super, you need to meet certain eligibility criteria to withdraw your benefit
For more information head to moneysmart.org.au.
Insurance options to consider
Different types of insurance includes life insurance, income protection insurance, home and contents insurance, trauma insurance, and consumer credit insurance – and they each cover unique events. Below are some articles and descriptions of different types of insurance to help.
- What are the different types of life insurance?
- Do I need insurance if my property is managed by strata?
Life insurance
If you became terminally ill or passed away, life insurance would provide a lump sum payment to help support your loved ones long after you’re gone.
Income protection
If you can’t work due to illness or injury, income protection provides monthly payments to help protect your lifestyle and financial wellbeing while you focus on recovery.
Real people, real success stories
Amy, registered nurse in July 2020
Amy* was a registered nurse working in a busy hospital, with a mortgage and a young family to support. Amy knew if she was unable to work for a significant period of time due to injury or illness she would be at risk of losing her home, and would struggle to pay her essential food and daycare expenses. So, she took out an income protection insurance policy to ensure her essential expenses would be safeguarded. Sadly, in late 2020 Amy became unwell with severe depression, brought about by long hours and a demanding workload, and was unable to return to work for several months. However, thanks to her income protection insurance, she was able to focus on her treatment and recovery without having to worry about her family’s financial situation.
*Name changed to protect identity.
Alternatively seek financial advice – speaking with a financial adviser can help tailor a solution that is matched to your individual needs and goals. Moneysmart.gov.au has a list of financial advisers you can contact.
This information was published on 28 June 2024 and is subject to change.
The issuer of this information is ANZ. While ANZ has taken care to ensure that this information is from reliable sources, it cannot warrant its accuracy, completeness or suitability for your intended use. To the extent permitted by law, ANZ does not accept any responsibility or liability arising from your use of this information.
ANZ Home Loan Protection is issued by Zurich Australia Limited ABN 92 000 010 195 AFSL 232510. Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522 distributed this product. We recommend that you read the ANZ Financial Services Guide (PDF) and the ANZ Home Loan Protection Product Disclosure Statement and Policy Document (PDF) (available online or by calling 13 16 14) before deciding whether to continue to hold this product.
The Ezicover insurance products described on this website are issued by Zurich Australia Limited (Zurich), ABN 92 000 010 195, AFSL 232510 of 118 Mount Street, North Sydney, NSW 2060. Ezicover is a registered trademark of Zurich. ANZ has entered into a long-term strategic alliance agreement with Zurich. The content on this page relates to policies issued from 27 September 2021 under the Ezicover Life Insurance Product Disclosure Statement (PDF). Please read the PDS and Target Market Determination (PDF) before applying. If you buy a Zurich Ezicover policy ANZ receives 20% commission (excluding government charges) of your insurance premium.
The content on this page also relates to policies issued from 27 September 2021 under the Ezicover Life Insurance Product Disclosure Statement (PDF). Please read the PDS and Target Market Determination (PDF) before applying.
This information is of a general nature and has been prepared without taking account of your personal objectives, financial situation or needs. Before acting on the information, you should consider whether the information is appropriate for you having regard to your objectives, financial situation and needs.
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Although Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522 AFSL 234527) distributes these products, ANZ does not guarantee or stand behind the issuers or their products.