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Financial Planning For New Parents

Lack of financial planningIf you have just had a baby – the time to start saving is now! First time moms are often shocked at the high everyday costs of caring for a newborn baby and most new parents have little money to put away for a rainy day. The sad news is that the cost of childcare will escalate and even though it may seem years before your baby is ready to start school, the fact is that seven years fly by and before you know you it, you will need to find extra money to buy your child’s school uniform, pay school fees, buy books, stationery, etc.

 

Start saving today

There are many good, high interest short term saving plans that start from as little as R100 per month. If you save for seven years, by the time your child is ready to start school, you will have a nice nest egg saved which will go a long way. The cost of education in South Africa is increasing and to this end, even a small amount, like a R100 to start will go a long way.

 

Education

As parents, we all want our children to have access to the best opportunities in life and a university education is by far one of the best gifts we can give our children. Sadly, most South African children will never see the inside of a university campus, because their parents do not have the available funds to pay the high tuition costs. South African companies such as Sanlam and Old Mutual have created affordable saving plans that will help ease the future costs for cash-strapped parents and assist them give their kids life’s best gift – an education. There are a number of tailor-made savings plan that will allow parents to kick-start savings for their child’s education and for just R100 a month, these savings plans will ensure that by the time their child is ready to start his or her studies, a large portion or all of the costs will be taken care of.

For parents of an infant or toddler, university seems like a distant dream, but the reality of the situation is that 17 or 18 years pass so quickly and having an education policy in place will provide parents with the peace of mind that when the time comes, they will have the fund needed to help their children achieve their goals. A policy does not necessarily have to be used for educational purposes and if the child feels that university is not their dream, the saved up cash can be used for any other need – a first car, a wedding, or capital to start their own business.

 

Life Insurance

Little in life is guaranteed! When a couple become parents, they need to reassess their lives and their priorities and make certain that in the event of an unforeseen event, such as death, that their children and their remaining partner or spouse are able to cope financially. Death is a sad and obviously very traumatic event and only compounded when a family is left destitute. Life insurance is very necessary and usually, healthy parents are able to secure affordable life insurance that will provide adequate coverage. A financial consultant will be able to assess your family’s needs and determine the right amount of life insurance that will be needed for your surviving family to retain their way of life. Don’t leave financial planning to chance – take the necessary steps to ensure that your family is provided for!

 

A Will

As with life insurance, a current and regularly updated will and testament is a must for all parents. In South Africa a benefactor who passes away without a testament or will is leaving behind endless troubles for their surviving family members. If a proper will is not in place, the assets of the benefactor could be used to cover estate duty taxes and income tax and worse, the assets meant for the children or spouse may never reach them. A will is simply an intention of who you wish to receive your assets. Couples who have a home, a car, life policies, etc., can draw up a will using an easy template that can be found on the Internet, (funeralguide.co.za/write-your-own-will/free-will-template.html). Once the will has been drawn up, the couple can nominate an executor who will be responsible for handling matters. The last will and testament will also give parents the opportunity to state who they nominate to provide care for their minor child or children.  If you are a new parent, take the time to find out about drawing up a will and ensuring that your child will be given the care and love that it deserves.

Remember to review your wishes regularly (at least once a year) as circumstances change.

Many people prefer a financial institution or bank to handle the drawing up and executing of their will. The institutions will usually charge a once off free to draw up the will, together with an annual fee. If your estate is complicated, it may be wise to allow an experienced person to draw up the will.

 

Cut back today and save for tomorrow

The cost of living is on the increase and it is often difficult for parents to figure out what to cut back on today in order to save for future expenses. Draw up a budget and go through it together and try and find ways to cut down expenses so that a little can be saved today.

Start off with a small goal (such as a R100 per month) and try to:

  •       Pack a lunch for work, rather than buying lunch (even if you do this for two weeks, you will soon reach your R100 a month goal);
  •       Eat out less;
  •       Join the library instead of buying books, or swap books with friends or colleagues;
  •       If you are a stay at home mom, find ways to make a little extra money to supplement your household budget, such as baking or babysitting (every little bit helps).

Very few of us want to spend our time worrying about the future but with all financial issues properly taken care of – we can spend less time worrying and more time enjoying life!

 

 – Kathy Baron

 

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