Put your own financial needs first
However, Ronald King, head of technical support at PSG Wealth, argues that it is important for you to place your own long term financial needs first, so as not to become a financial burden to your children in the future.
King reveals: “Scoring your own financial goals first puts your child in the best position for the future. 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 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,” said King.
Giving your children the best
According to King, giving your children the best opportunities that you are able to is important, but this needs to be weighed against your finances. It is important to rather look at the long term gain for yourself and your child over the short term benefit that spending money on specialised equipment and private coaches might bring.
“Spending money on coaches and expensive equipment at the expense of retirement saving makes you a good sport in your children’s eyes, but is equivalent to choosing a short-term benefit for your child over a long-term gain,” emphasises King.
According to King, by investing in your long term financial needs with as much passion as you put into investing into your child’s future, you will reap the rewards.
“Over and above your retirement savings, you can still provide for these extras if you can afford to, 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 is expensive to retire. According to him, for every R4 000 per month that you need, R1 million is needed in capital at today’s monetary value.
Having a medical scheme is vital too. This is to ensure that all of your medical costs, including those unforeseen expenses, are covered.
“A good scheme will require about another R1 500 000 in capital, to fund comprehensive cover for two until age 95.”
King provides the following example to highlight the importance and the impact that long term saving can have:
“Take an example of saving R2 000 per month for a period of 18 years (from when your child is born until they reach Grade 12), with the amount increasing according to the inflation rate and assuming an annual investment growth rate of 14%.
“Then imagine you stop contributing and let the investment grow and compound for another 20 years. This will make for quite a sizeable sum. You would be able to withdraw a monthly pension of R9 300 at today’s value, which would increase with inflation every year,” explains King.
For more information on how much you will need in retirement, click here.
Recent Articles
Featured Why you need to adapt your attitude towards money as you age
As you move through life, you will encounter different phases and interests, and your perspective will change. Where you choose to spend your money will change as a result. We have a look at the impact on your finances.
How to pay your bills on time and save your credit score
The most crucial factor in ensuring a good credit score is meeting your monthly payments – in full, and on time. But how can you guarantee you don’t miss any payments?
What are your financial responsibilities in the funeral of your employee’s family?
When your in-home employee loses a loved one, your heart will go out to them, and you may feel compelled to contribute financially towards the costs of the funeral. However, this comes with a lot of uncertainty. How much should you contribute?
7 Emotions that impact your finances
We all strive to make rational financial decisions, to control our costs in the present and increase our future financial gain. However, what would happen if we allowed our emotions to take the lead in money matters?
Deals
Book 3 nights and get the 4th one free at Sun City
Price: Available on request
When: Until 30 June 2021
Where: Johannesburg
Bakwena Spa Mother’s Day Special
Price: From R849
When: Until 09 May 2021
Where: Western Cape and Gauteng
Spur Monday Special
Price: R60
When: Mondays
Where: Nationwide