Young professionals favour investments over long-term insurance

July is Savings Month, and recent research by Liberty, a financial services provider under the Standard Bank Group, highlights a fascinating trend: South African young professionals under 35 prioritise investment savings rather than investing in life insurance or financial protection from critical events. While commendable, this saving-first approach could leave them financially vulnerable to unexpected life challenges.

What research tells us about young professionals’ financial priorities

According to Liberty’s insights:

• Approximately 90 000 clients under 35 use Liberty’s investment products.
• Another 230 000 clients in this age group use Liberty’s Stash Savings app.
• However, only 6 000 have taken out life insurance, and around 30 000 have some kind of lifestyle protection, such as retrenchment or critical illness cover.

Why life insurance takes a back seat

Liberty’s findings align with global trends. Research reveals several reasons why younger professionals are hesitant about life insurance:

1. Present Bias: Young professionals often focus on immediate responsibilities, like buying property, paying off debt, or building careers, instead of planning for the long term.
2. Perception of Expense: Many believe life insurance is costly and more suitable for families with dependents.
3. Feeling Healthy and Invincible: Younger individuals may feel that life insurance is unnecessary due to their current health.

The financial vulnerabilities being overlooked

Kresantha Pillay, Chief Specialist for Risk Products at Liberty, explains that younger individuals are mistakenly overlooking the importance of financial protection. While it’s true that people under 35 are generally healthier, they are also more at risk for serious accidents or retrenchment.

For example:

• 2.2% of Liberty’s 2024 insurance claims came from individuals under 35.
• Cases of death, disability, and critical illness still occur even in this demographic, proving that no one is immune to life’s unexpected turns.

The benefits of starting insurance early

“Young professionals in South Africa are sophisticated savers, but there’s a critical missing piece—ensuring they’re financially protected from adverse events that can impact future earning potential,” says Pillay. Here’s why investing in insurance deserves attention:

1. Lower Premiums: Young, healthy individuals receive cheaper premiums, making it a cost-effective choice for the future.
2. Debt Protection: Life insurance ensures loans or debts aren’t transferred to family members in case of untimely death.
3. Legacy Building: Families can preserve their financial position or legacy through appropriate life cover.

Broad insurance options for holistic protection

Financial protection goes beyond just life insurance. Comprehensive insurance solutions can shield young individuals against:

• Loss of earnings due to retrenchment.
• Injuries or critical illnesses that impact one’s ability to work.
• Maintaining lifestyle stability during major life disruptions.

“Comprehensive cover helps keep your lifestyle and aspirations on track, ensuring resilience during financial shocks,” adds Pillay.

Why financial advisers matter

Navigating the world of insurance and savings can be tricky. A qualified financial adviser can:

• Help clarify your needs.
• Design personalised cover solutions that align with your budget and goals.
• Guide you in staying committed to securing a financially stable future.

While investments and savings may seem like logical first steps, young South Africans should not overlook the significance of life insurance and other protection solutions. By taking smaller, strategic steps now, they can safeguard their future earning potential and ensure a stable financial future.