There's a mini-game on the elet.biz homepage: the Plan Tower. In half a minute, you build a tower out of the family's plans – and along the way, the mechanics teach something better than a thousand words could: plans build on each other, and the whole structure only holds if it stands on a full-width foundation. That foundation is protection. This article translates the game's lesson into the language of family finances.
- Family plans build like a tower: housing, everyday life, education, goals – all resting on income.
- Protection isn't another floor; it's the full-width foundation: you can't see it, but the whole tower stands on it.
- Foundation before height: protection and the emergency fund come first, then the return-focused plans.
The tower: how plans build on each other
Every family builds: the first floor is housing, then everyday life goes on top, education above that, and dreams at the very top – a holiday home, a business, early retirement. But the tower doesn't stand in mid-air: monthly income holds up every floor. While income is stable, the tower grows; if it's lost, the floors come under threat one after another – and typically the most cherished ones, the top floors, fall first.
The foundation: what the PROTECTION level does in the game
In the game, the protection level gives the tower a full-width foundation – and that's exactly what well-sized term life insurance does in real life too. It doesn't raise the tower: it holds it up. If the earner's income is lost, the sum assured gives the family years to keep housing, school and everyday life from collapsing. How wide that foundation is depends on sizing: the principles of sizing the cover.
The building order: foundation → reserve → floors
Financial planning has its own statics too. First come the emergency fund (a buffer for unexpected expenses) and protection (the foundation against lost income) – these two can be built cheaply and quickly. Then can come the return-focused floors: savings, investment, retirement goals. The reverse order – floors without a foundation – goes unnoticed in good times and is disastrous for your plans in bad ones.
What does the principle mean in practice?
- If you have a mortgage and dependants but no protection: the tower stands without a foundation – this is the most urgent task: who it's for and why.
- If you have protection but no one has looked at it for years: the foundation may have narrowed – the mortgage, the family and the plans have changed: reviewing the sum.
- If there are no dependants and no mortgage: the foundation can wait – the emergency fund comes first: when it's not worth it?
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