Most parents would like to give their children everything, which can mean they put their own needs and wants after those of their children.
However, Ronald King, head of technical support at PSG Wealth, argues that it’s important for you to place your own long-term financial needs first, to avoid becoming a financial burden to your children in the future.
King says, “Realising your own financial goals ultimately puts your children in the best long-term position. Too many children find themselves in the ‘sandwich generation’ - those who are caught between the financial needs of their own children and those of their parents.”
King adds that we are living for longer these days.
“If both parents are older than 60, one of them will on average reach the age of 95. This means that there will be a good innings to cover financially once retirement comes,” says King.
Giving your children the best
According to King, it’s important to give your children the best opportunities, but this needs to be weighed against your finances. It’s important to prioritise the long-term gain for yourself and your child over the short-term benefit that, for example, specialised equipment and private coaches might bring.
“Spending on non-necessities at the expense of retirement saving makes you a good sport in your children’s eyes, but it’s equivalent to choosing a short-term benefit for your child over a long-term gain,” emphasises King.
“Over and above your retirement savings, you can still provide for these extras if you can afford it, but remember that next to a good education, the most important gift you can give to your child is your own financial independence.”
The cost of retirement
King points out that it’s expensive to retire, and that you need to save about 15 times your annual salary.
For instance, if your monthly salary is R30,000, multiply that by 12 and it will give you an annual salary of R360,000. To see how much you’ll need at retirement, multiply R360,000 by 15 - that’s a total of R5.4 million. And, if you’re going to indulge in extra luxuries, you’ll need to increase your savings.
Another way of finding out what you’ll need at retirement is to multiply your monthly budget by 300. If you think you’re going to need R30,000, multiply that by 300 and you’ll get R9 million.
For more information on how much you will need in retirement, click here.