It’s a well-established fact that raising a family is expensive – in fact, at the end of 2013 the government estimated that it costs R1.7 million to raise one child! However, with the right long-term planning and financial solutions, it is entirely possible to successfully budget for your children’s future.
Follow the three tips below to ensure that your children have the best chance at a stable, happy life:
1. Plan early: Even before you have children, putting money aside each month can make a huge difference. For example, if you save R600 per month at an interest rate of 9% for two years before you have a baby, and continue to save until the child is five, you will save R69 428.
Consider increasing the savings annually by at least the inflation rate.
2. Short-term savings: It’s a good idea to have some money in a short-term savings account, because there will always be unexpected expenses when you have children at school, such as excursion costs.
Money market accounts are ideal for this purpose, as you can access your money as soon as you need it.
3. Medium- to long-term savings: Education or endowment policies are recommended to secure your child’s educational and professional future. These policies are specifically designed for education and require you to save a specific amount each month. They also cannot be accessed easily and you will be penalised for cancelling the policy, which ensures a higher savings success rate.
All of the above products are available from your bank. As some may need a little management, consider speaking to a financial advisor – they can also work out a savings and investment plan to suit your needs and income.