Publications
Partners
(<a href="http://www.shutterstock.com">Shutterstock</a>)
[http://www.shutterstock.com]
Finding out that you are expecting a bouncing bundle of joy is exciting - but are you financially fit? A Fin24 user offers six useful tips:
A FEW weeks ago, I found out that my wife is pregnant. I’ve never experienced such a deep and overwhelming sense of joy and happiness. For about 15 minutes I could not stop smiling and using the word “WOW!”
Then my emotion changed from bliss to sheer horror. A million questions began to run through my head from the cost of childbirth and if my medical aid covered this, to the cost of car seats and private school fees.
The ensuing panic forced me to research how much children actually cost and how to save when you have them.
A parent will pay about R3m over the lifetime of each child, according to an article I read. This is all inclusive and entails education, food, clothes, school tours, sporting kits, etc. Having only one child now becomes a real option!
I looked at the actual cost of private school fees and my panic grew.
Top private schools in Johannesburg cost upwards of R80 000 a year. A quick total cost estimation in my head taking into account 12 years of school, inflation and price increases – okay, so that’s well over R1m in tuition fees.
Having never previously been exposed to this, my heart skipped a beat. I attended a private school on the East Rand, Johannesburg and matriculated in 2000.
I then thought, thousands of parents do this and have done this before, how did they manage? I decided to ask parents how they did it. I came up with a few trends you may find useful:
1. Health cover
On finding out that they were pregnant, most parents adjusted their medical aid cover/plans to make sure that they were covered for the majority of the childbirth and hospital costs.
2. Smart buying
During their pregnancy parents slowly began buying all the essentials a new-born would need such as nappies, wipes, clothes, formula, a crib and car seats. One parent said to me that they bought new-born goods along with their weekly grocery shopping. In that way, they didn’t really feel the bite.
3. Savings vehicle
A few smart parents opened up a savings account or a unit trust account for the benefit of their children. This serves two purposes: firstly for the parents to start saving specifically for their children’s education, and secondly for family and friends to also contribute to the savings.
A number of parents told me that at least for the first three birthdays, they asked family to put money into the savings account or unit trust instead of buying presents for their children.
4. Debt-free goal
Some parents said that they set themselves a goal of paying off their primary house and cars by the time their children hit high school as well as eradicating all other forms of debt like personal loans, credit card debt and overdrafts.
High school, according to them, is the most expensive period of their lives.
5. One vs two salaries
A number of parents brought up the debate of whether both parents should continue to work and both earn a salary or if one should stay at home to look after the children.
The jury is undecided on this issue, but it seems that most parents don’t have a choice and have to return to work.
6. Retirement and education
The last major trend revealed that those parents who continued to save for their retirement as well as their children’s education, had to cut down on a number of luxury items.
This is a key point - saving over and above your pension fund contributions is critical. Most pension and retirement funds won’t see you through your entire retirement. Additional inflation-linked, income-generating assets are required to supplement income during retirement.
One parent said that he hoped his child is excellent at either academics, music or sports and be awarded a bursary or scholarship to attend a top school, so that he would not have to pay school fees. I’d rather not rely on hope alone.
Is there any other advice you could offer to this soon-to-be parent?
How do parents provide the best for their children and continue to save adequately for their retirement?
* Add your voice to our Savings Issue.
Follow Shane on Twitter @shanelslater
A FEW weeks ago, I found out that my wife is pregnant. I’ve never experienced such a deep and overwhelming sense of joy and happiness. For about 15 minutes I could not stop smiling and using the word “WOW!”
Then my emotion changed from bliss to sheer horror. A million questions began to run through my head from the cost of childbirth and if my medical aid covered this, to the cost of car seats and private school fees.
The ensuing panic forced me to research how much children actually cost and how to save when you have them.
A parent will pay about R3m over the lifetime of each child, according to an article I read. This is all inclusive and entails education, food, clothes, school tours, sporting kits, etc. Having only one child now becomes a real option!
I looked at the actual cost of private school fees and my panic grew.
Top private schools in Johannesburg cost upwards of R80 000 a year. A quick total cost estimation in my head taking into account 12 years of school, inflation and price increases – okay, so that’s well over R1m in tuition fees.
Having never previously been exposed to this, my heart skipped a beat. I attended a private school on the East Rand, Johannesburg and matriculated in 2000.
I then thought, thousands of parents do this and have done this before, how did they manage? I decided to ask parents how they did it. I came up with a few trends you may find useful:
1. Health cover
On finding out that they were pregnant, most parents adjusted their medical aid cover/plans to make sure that they were covered for the majority of the childbirth and hospital costs.
2. Smart buying
During their pregnancy parents slowly began buying all the essentials a new-born would need such as nappies, wipes, clothes, formula, a crib and car seats. One parent said to me that they bought new-born goods along with their weekly grocery shopping. In that way, they didn’t really feel the bite.
3. Savings vehicle
A few smart parents opened up a savings account or a unit trust account for the benefit of their children. This serves two purposes: firstly for the parents to start saving specifically for their children’s education, and secondly for family and friends to also contribute to the savings.
A number of parents told me that at least for the first three birthdays, they asked family to put money into the savings account or unit trust instead of buying presents for their children.
4. Debt-free goal
Some parents said that they set themselves a goal of paying off their primary house and cars by the time their children hit high school as well as eradicating all other forms of debt like personal loans, credit card debt and overdrafts.
High school, according to them, is the most expensive period of their lives.
5. One vs two salaries
A number of parents brought up the debate of whether both parents should continue to work and both earn a salary or if one should stay at home to look after the children.
The jury is undecided on this issue, but it seems that most parents don’t have a choice and have to return to work.
6. Retirement and education
The last major trend revealed that those parents who continued to save for their retirement as well as their children’s education, had to cut down on a number of luxury items.
This is a key point - saving over and above your pension fund contributions is critical. Most pension and retirement funds won’t see you through your entire retirement. Additional inflation-linked, income-generating assets are required to supplement income during retirement.
One parent said that he hoped his child is excellent at either academics, music or sports and be awarded a bursary or scholarship to attend a top school, so that he would not have to pay school fees. I’d rather not rely on hope alone.
The first scan of the Lavagna-Slater offspring
Is there any other advice you could offer to this soon-to-be parent?
How do parents provide the best for their children and continue to save adequately for their retirement?
* Add your voice to our Savings Issue.
Follow Shane on Twitter @shanelslater
