When faced with the unexpected, we shouldn’t bank on crowdfunding

Imagine, for a moment, the unimaginable. Your spouse — your best friend, the parent of your children — is diagnosed with a terminal illness, or worse, dies unexpectedly before your family had the chance to say good-bye.?

In your grief, the world seems to stand still. Managing daily tasks, like household chores or paying bills, feels all but impossible. It is hard to imagine that things could get any worse. But sadly, for a lot of people, they can. If you and your spouse rely on each other’s income to pay for your living expenses, including the cost of raising your children, paying your bills, and paying down your mortgage, things can get a whole lot worse if you don’t have the means to replace that lost income.

The reality is that financial pressure on households is increasing at record rates. From rising living costs to stagnant wages, many households find themselves struggling to make ends meet. According to StatsCan, one in three Canadian households are experiencing financial hardship, and one in four are unable to cover an unexpected expense of even $500. Unforeseen circumstances such as job loss, illness, or economic downturns exacerbate these challenges. In worst case scenarios, the death of a family member is profoundly distressing and can leave lasting impacts on multiple fronts. But with the death of a life partner comes grieving — not only for your lost partner, but also of the future you had imagined for yourself and your children.?

During an already challenging time, the last thing you need is to add your family home, your neighbourhood, or your children’s school to your list of good-byes — simply because you can't afford your current lifestyle on a single income. To avoid this scenario, many grieving families turn to crowdfunding platforms, like GoFundMe, to help raise enough money to afford rare treatments or medications, or to help cover funeral costs or the mortgage on one salary. But who wants to worry about staying out of debt or losing their home when grieving this type of loss??

While GoFundMe has proved to be life-changing for many Canadians who have experienced tragedy, less than 12 per cent of fundraisers actually reach their goals, proving that there is no guarantee you’ll get the support you need. So what does that mean for grieving families?

And consider that the fees from short-term crowdfunding platforms can wind up being more than conventional planning tools, such as life insurance. According to the CBC, “GoFundMe, which says it has raised over $1 billion and bills itself as the world's No. 1 personal fundraising site, deducts a 5 per cent fee from each donation, a processing fee of three per cent and a 30-cent charge per donation.”

That means, if someone donates $500 to one of these campaigns, $40.30 is going directly back to GoFundMe, taking that initial $500 down to $459.70. If you look at that over a longer period of time, an annual $500 donation made over 20 years should be $10,000; instead, recipients are getting $9,194.?

Compare that to a 20-term life insurance policy for a healthy 30-year-old non smoking woman. It will cost her $45 a month and comes with $1,323,544?worth of coverage. It’s easy to see which option gives Canadians a bigger bang for their buck.

And here's another reason we shouldn’t replace insurance with crowdfunding: As more Canadians turn to crowdfunding for financial help due to health emergencies or the death of a partner, the more commonplace and habitual these stories will become — and the less Canadians will be moved to donate. In other words, the power of crowdfunding?today lies in its novelty, unlike conventional financial planning tools that focus on long-term stability and growth.?

The solution is as simple as it is challenging. In order to prepare for life’s uncertainties, we must commit to setting aside funds for future emergencies. If not for a vacation, then for replacing your vocation. If not for a family car, then for your family’s care.

The financial and emotional well-being of our loved ones is not worth this sort of gamble. Crowdfunding as a substitute for insurance is a fad we shouldn’t bank on.?

Want to learn more?

Connect with the experts at Serenia Life to find out how life insurance can be your family's financial safety net during an emotionally challenging time.

Visit our website to get started: SereniaLife.ca