Protecting Me – Activities
The activities in this topic will help you to understand how to manage and prepare for the financial risks we can all face in everyday life. Risk is a challenging topic, and your attitude to risk is personal. Share your views through these activities and find out if others in your group feel the same way.
Quiz: Personal financial risk
Using the scale of R (relaxed), U (uneasy), VU (very uncomfortable), rate how you would feel about the financial impact of:
- Having your carpets ruined by a burst water pipe
- Having your car stolen
- Losing your job when your employer goes bankrupt suddenly
- Suffering complications after tearing your knee ligaments and being off work for 6 months
- Having your identity stolen
- Losing your savings through an investment scam
- Having no access to your own finances
Group discussion - Risk scenarios
Decisions about how to manage and mitigate risk are personal. The way that you choose to manage your exposure to unexpected injury or loss can change as your attitudes, experience and financial capacity change. Sometimes you might change something in your behaviour or environment to reduce risk, for example installing a burglar alarm. You might also choose to ‘transfer the risk’ to an insurer by taking out an insurance policy.
Choose scenarios from the list below that are relevant to you, and have a discussion about how you would deal with each risk.
Scenario 1
Risk: My dog gets a chicken bone stuck in her throat and needs an operation to remove it.
How could it affect me? It could cost me $3000 in veterinary costs
How can I deal with it?
I can manage the risk by:
- Carefully managing the dog’s diet
- Having an emergency fund
I can insure against the risk:
- Pet insurance
- remember to check the fine print carefully so you know exactly what is covered
- think about whether the premiums are appropriate for the likelihood of your dog choking
Scenario 2
Risk: Taking my dog home from the vet, I drive my 5 year old car into a Ferrari; my car is written off and I have to pay for the rear fender of the Ferrari to be fixed.
How could it affect me? $10,000 for the Ferrari. Plus I have to wake up 2 hours earlier to catch public transport to get to my job. Public transport to and from work costs me $15 per day – 3 times the petrol cost.
How can I deal with it?
I can manage the risk by:
- Obeying road rules
- Employing defensive driving strategies
- Having an emergency fund
- Is it big enough?
I can insure against the risk:
- Third party insurance
- Comprehensive car insurance
- Check that the premiums and excess are not more than the value of your car
Scenario 3
Risk: I want to buy a new computer for my studies but my partner manages our finances and I don’t have access to any of our accounts
How could it affect me? I will have to make do with a borrowed/old computer that is unreliable. It may impact on my ability to complete my assignments.
I also miss having the freedom to choose how to use money I earn.
How can I deal with it?
I can manage the risk by:
- Sharing bill paying
- Discussing joint finances
- Sharing account passwords
Scenario 4
Risk: My bank rings me to ask about some recent purchases on my credit card and I know I didn’t make them
How could it affect me? I will need to provide a statement to the bank that I did not make the purchases. I will have to wait a week for a new credit card to be issued. Even if the transaction is found to be fraudulent it may take up to 6 weeks for the funds to be returned to my account.
How can I deal with it?
I can manage the risk by:
- Using secure passwords, and not the same for all accounts
- Making sure passwords are stored securely
- Checking bank and credit card statements regularly
MoneySmart on banking and credit card scams
MoneySmart on other scams and identity fraud
Scenario 5
Risk: My laptop and mobile phone are stolen from my share house
How could it affect me?
It will cost me $1200 to replace the laptop, not to mention the data that I have lost from the hard drive.
I owned my mobile phone and used a pre-paid account. I can get a new phone if I take out a new contract but it will cost more than I was paying for pre-paid and will lock me into a contract for 2 years.
How can I deal with it?
I can manage the risk by:
- Having good house security measures
- Backing up my computer
- Having an emergency fund
I can insure against the risk:
- Contents insurance
- Are the premiums appropriate for the value of the items you have insured?
- Are you all in agreement about what to insure?
- Do the insurance companies charge extra for a shared household?
- How much of the items would be covered if they weren’t listed separately in the policy?
- Mobile phone insurance
- What is the cost of insurance offered as an add on to a plan?
MoneySmart on mobile phone/tablet/laptop-insurance
Scenario 6
Risk: I have back pain and need physiotherapy. The physio charges $70 per session and says I need to come weekly for 3 months
How could it affect me?
It will cost me $1200 to replace the laptop, not to mention the data that I have lost from the hard drive.
It will cost me $910 for three months, and possibly more for ongoing visits.
How can I deal with it?
I can manage the risk by:
- Looking after my posture and fitness
- Including physio costs in weekly budget
I can insure against the risk:
- Private health insurance
- What are my health needs?
- Does the private health insurer cover the services that I need?
- Am I getting value for money?
ACCC – Private health insurance
Scenario 7
Risk: I am on an overseas holiday and contract gastro. I need to be admitted to hospital and miss my flight home.
How could it affect me?
The night in hospital and flight home cost me $5,000. I need to use my credit card to pay.
How can I deal with it?
I can manage the risk by:
- Having an emergency fund
I can insure against the risk:
- Travel insurance
- What is the cost of the insurance – premium & excess?
- What situations does the policy cover?
- What proof do I need to make the claim?
MoneySmart on travel insurance
Alternatively, you could discuss any experiences you have had which have cost you more than you expected, how you managed the situation and if you would do anything differently in the future.
Back to topicGroup discussion: Personal financial risks
- How would you manage if you became ill or injured so that you were off work for 6 months?
- How will you cover your monthly expenses?
- How much annual and sick leave do you have?
- How much emergency savings do you have?
- What would happen if you became disabled so that you are unable to work again?
- If eligible for government support, will it be enough?
- How will you cover your monthly expenses?
- If you have debt, how will you pay off or service that debt?
- What insurance do you currently have through your super fund?
- Check what you are covered for
- How much does the cover provide?
Links
MoneySmart on total and permanent disability
MoneySmart on income protection
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