Financial Security - Essay Example

Why is financial security important? Financial Security In financial terms, financial security means “a contract whereby the issuer of the security commits to pay to the investor that lends the money today, a stream of cash flows in accordance with a given timetable” (Cooperative State Research, 2007). Financial security in easy terms is to save money for the future so that a person or family can live a modest life. For example, suppose you are currently employed with a pay of $2500 per month. You use half of the amount in paying bills and taxes. The remaining is used in acquiring the necessities of life. At the retirement age, you have no job and therefore no means of supporting yourself or your family. How do you think you will be living? Will you be leading a comfortable life? The answer is no. This is because in your earlier stage of life you did not manage your money properly and because you did not want to face hardships at time you did not secure your future and are now facing hardships at old age. This is a mere reflection of the importance of financial security. Importance of Financial Security “Financial security is the ability to meet future needs while keeping pace with day-to-day obligations. Preparing for retirement and potential long-term care costs takes planning, saving, and debt control” (Cooperative State Research, 2007). Financial security is more than important now-a-days. It is the only means of surviving in the future as the inflation keeps rising not only in this country but all over the world. The concept of money management comes in when we talk about financial security. The management of money is to outline the specific areas where money could be needed in daily lives and thus have enough left to save for the future. Let’s continue the above example of a person earning $2500 per month. If the person wants to have secure future, he will try to manage his money in a way that he ends with $100 per month. He could use this money either to save it or to use it for his luxury. If he is wise, he would save that money and then he could live a modest life in old age. It is not necessary that the money saved today is only to lead a better life in the future. It is also a means of providing education to children, paying off loans and so on. Suppose you have two children. You want both of them to go to college. But keeping your financial position in mind, only one can be sent to college. The other child can take student loan and then pay off the debt when he is capable. Do you think that it would be a fair decision? For both of the children you need to have a strong financial security. For that to happen, you have to start planning, investing and saving for the future of your children and yourself also. “Financial security will not happen by itself, it is up to you, take the time to educate yourself and take control over your life” (Network Marketing). In today’s modern time where computerization and modern technology is advancing, it is rapidly replacing workers and employees. Does this modernization offer any comfort to the working class employees? No it does not. You never know when you might be replaced by some other person with better capabilities than you or with a machine. Does any of the jobs today offer any guarantees to a secure future? The answer is again no. “No longer can feel we safe and secure in our workplace as the business world of today offers no guarantees” (Network Marketing). It is not the responsibility of the adults to learn the value and importance of securing the future financially. Kids, especially teenagers should also realize its importance and start acting now. It is at this age that they can start thinking about their future rather than worry about it when the time has passed. For example, a certain teenager does not care about the financial problems that might occur when he is off age. He spends all his time in play and fun. Even if he does a part-time job, he does not save thinking that he will have other opportunities to save a little of his income. But as time passes, he does not get that kind of opportunity where he could save for a rainy day. He is barely meeting the ends. If he had saved even a little bit when he was young, he might have used that amount to invest in some of the securities that today bank’s offer as a way to help secure the future. Keeping in view the above argument, people should start searching for other investment opportunities that can provide them at income which could be used for saving for the future. There are lots of financial advisors in the country that help in planning out the financial security for the future. Besides this, a lot of different securities are offered by the banks and other financial institutions. These include different types of insurance policies, retirement plans, saving schemes, equity securities and so on that provide a steady stream of cash-flows in the future. Another way of securing ourselves is to build a network of friends in communities. If you give something to the communities today, they might return the favor when we need it. For example I have a friend in my neighborhood that is in need of some work to be done. He asks for my help and I offer it gladly. My friend remembers that I have done him a favor although I do not think of it as a favor. When I would be in any trouble, this friend would come to my aid first as I had helped him previously. People today believe that it is the time for specialization in work. They are so focused on work specialization that they forget to build their different skills like painting, carpentry, and so on. When the time comes all the skills that a person possesses can help him. For example, if a person does not know how to mend furniture or fix the water works, he would have to hire help and pay them. Thus the payment that could have been saved is used to pay the workers. Governments also emphasize on the importance of financial security. Different governments have different plans to try to secure their citizens as better as they can. In United States, we have the Social Security Number, which is a government’s way of protecting its citizens socially and financially. Also the government is taking active part in educating the people on the importance of a financially secure future. Financial security is a tool that every individual, family and household needs to have. If they do not know the importance of this concept, they cannot plan for their future. Financial security is not a one step process. As Rachael Muller says “Protecting yourself financially is a multi-step process. Its impossible to predict every scenario you or your family could face in the future. There are, however, some steps you can take to influence a more favorable outcome, no matter what happens.” Works Cited Cooperative State Research, Education and Extension Service. July 18, 2007. Financial Security in Later Life United States Department of Agriculture. August 1, 2008 University of Nebraska. Setting Financial Goals Aids Financial Security. August 1, 2008 Network Marketing Business School.com. Do you have Financial Security or is it the Thing of Past? August 1, 2008 Muller, Rachael. A Different Kind of Financial Security August 1, 2008 Read More