This article was first published in the 2nd quarter 2014 edition of Personal Finance magazine.
Two financial services companies have launched initiatives aimed at improving your financial wellness or financial literacy. Momentum and 1Life have adopted quite different approaches, so it is likely that the appeal of their offerings will depend on how far down the path you are to financial wellness.
You will find Momentum’s online questionnaires and tools useful if you believe that you are in control of your finances – whether or not you have a financial adviser – and if you are fairly knowledgeable about the financial products you own.
1Life’s offering could prove useful if you are struggling with debt or need to get to grips with the basics of how to manage your finances.
Momentum’s online tools, which were launched late last year, are available free of charge under the “Your financial wellness” tab at www.momentum.co.za
The tools enable you to assess your financial situation, starting with the most important part of your finances, your budget. The My FinTrack application helps you to set up a budget and to compare your spending with that budget. Then you can use the My Financial Wellness Score questionnaires and the My Smarts calculators to determine how your financial plans are faring.
As is the case with other budgeting tools that we have written about previously in this column, you can link your bank accounts to My FinTrack, by entering your account numbers and passwords, and it will analyse your spending across all your accounts in real time.
My FinTrack brings to four the online budgeting tools from which you can choose; the others are by 22seven (www.22seven.com), which is part of Old Mutual, Sage Pastel (www.pastelmymoney.co.za) and Nedbank (www.myfinanciallife.co.za). Yet the banks still haven’t embraced these tools; they warn you not to reveal your passwords on these websites, despite the fact that millions of people around the world use similar tools to track their spending.
When 22seven was launched, the banks made a big fuss about customers compromising their accounts by revealing their passwords. Since then, First National Bank is the only bank that has allowed its customers to set up a read-only profile so they can link their accounts to these tools. Nedgroup responded by launching its own tool, which presumably is considered safe for its clients to use.
When I tried My FinTrack, I could not immediately import the transactions from my credit card account. Lee-Ann du Toit, the head of digital channels at Momentum, says My FinTrack is dependent on the online availability and stability of the banking websites to which it links.
But it is worth persevering, because most of the time these tools work well and take the slog out of budgeting, and their analysis of your spending can be helpful.
The My Financial Wellness Score questionnaires ask you about vehicle and household insurance, income protection, life cover, medical scheme cover, estate planning, retirement, critical illness and functional impairment, and how financially savvy you are.
To complete the questionnaires, you need to be familiar with the terms and conditions of your policies, or have the information to hand so that you can refer to it. So, for example, the questionnaire on income replacement asks whether your policy will pay out if you are disabled; it then asks whether the policy will replace 100 percent or 75 percent of your income. You are asked whether you have temporary disability cover that will pay out while your disability is being assessed, or whether you have assets that you could sell to cover your income during that period. This is a difficult question to answer on your own.
The retirement questionnaire asks you to categorise the level of your retirement savings in terms of the income they will provide in retirement. This question assumes you have an idea of how much capital you will have saved at retirement based on your investment strategy, how much income your capital will provide in retirement and for how long. Then it asks if you have considered the impact of inflation on your retirement income. Again, you need to have a clear retirement plan and a projected income. Hopefully, however, if you know you haven’t given it a thought, you will own up.
The critical illness questionnaire asks whether you have enough to pay for “quality” medical treatment that your medical scheme may not cover in full. The trick in answering this is knowing what “quality” medical treatment costs, and how many of us do?
It also asks you to assess whether your critical illness cover would be enough to allow you to move to a lower-paying and less stressful job.
When it asks “Do you have some form of functional impairment insurance?”, a pop-up hint helpfully tells you that functional impairment cover protects you against the financial impact of illnesses or injuries that are permanent.
At the end of each questionnaire, you are scored and advised whether or not your score is good. The answers you provide also generate some recommendations or tasks you can tackle in your own time to improve your financial wellness.
Although you may not be able to answer all the questions, the aim is to raise your awareness of issues that should be addressed in your financial plan. If you can’t answer the questions, you need to be honest with yourself and seek advice.
Du Toit says the questionnaires are most relevant to higher-income earners. Momentum is working on another set of questionnaires for what it terms middle-market consumers, and it will eventually expand the questionnaires to cater to consumers from all income levels.
Momentum clients who belong to the company’s health rewards programme, Multiply, earn points for completing the financial wellness questionnaires, regardless of the score achieved, because the aim is to ensure you are honest, Du Toit says.
The My Smarts section has calculators that you can use to plan your finances – home loan, vehicle finance, your children’s education, your retirement, or a savings goal. You can save your calculations for future use.
The My Filing facility is a great service – an online storage space for valuable documents, such as your will, identity documents, policies and so on. You can store up to two gigabytes, and the limit for each document is two megabytes.
Documents can be shared with your spouse or financial adviser, and electronic reminders may be set to renew, for example, passports or driver’s licences.
1Life’s initiative is called The Truth About Money (www.truthaboutmoney.co.za), and it includes a financial education course sponsored by the company, plus discounted debt counselling, will drafting and estate planning.
The course and the services are not restricted to 1Life clients. Anyone can apply to do the course by submitting a letter of motivation, stating why you want to do the course and providing your income and educational qualifications. 1Life will decide whether to sponsor you to do the course, based on the reasons in your motivation and your financial needs.
You complete the eight-hour, computer-based course at your own pace at any Boston City Campus or Business College around the country. The course material was developed by Gary Kayle, the founding member of The Money School, which provides financial education courses at workplaces for consumer groups and for couples.
The course is aimed at helping you to get out of debt, build wealth and change your financial future. It is worth R1 500, but 1Life will cover the cost in full if it chooses to sponsor you.
Laurence Hillman, the managing director of 1Life, says the 1Life Trust funds the courses and has budgeted for 40 000 people to do the course this year – possibly more through group seminars.
Hillman says 1Life will also soon make the course available online, but because it includes videotaped lectures, it will probably be accessible only by those with broadband access.
Besides promoting financial literacy, 1Life aims to help you to manage your finances and provides other services to assist you. If you are in debt, or need help with a will, winding up an estate, or claiming life cover after the death of a partner or family member, 1Life can assist, thanks to partnerships with Debt Busters, the biggest debt counselling business in South Africa, and Lipco, the biggest legal mediation company in the country. Through these partnerships, 1Life clients and anyone who can motivate to 1Life’s satisfaction for receiving the benefit, can enjoy a discount of 20 percent on the legal fees for debt counselling services, or a discount of 35 percent on transfer and bond registration fees when winding up an estate, and free advice on wills and estates.
In addition, anyone who has completed the financial literacy course will be given access to some financial calculators and money management tools to help them to put their knowledge into practice.
Whether or not you do the course, you can sign up on The Truth About Money website for regular educational articles and monthly tips aimed at improving your financial skills.
Both Momentum’s and 1Life’s offerings deserve bouquets, and it is up to us to make the most of them to improve our financial fitness, and that of our nearest and dearest.