Planning for the future of your children

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Children are beautiful and they can give you a reason to strive to do better but they come with a lot of responsibilities. To a poor parent, this may be the beginning of enormous sacrifices. Planning for the future of your children when they are still unborn or when they are still toddlers will relieve some financial strain on you as a parent.

Most often poor parents are faced with the dilemma of having to choose to live a good life or to sacrifice their well being so as to allow their children to live a better life than theirs.

The most tough time of being a parent is when your child enrolls for school and university/College. I can recall the struggle my parents went through to raise my fees – it was a real disaster. Sometimes my mother had to sacrifice herself for us to go to school with books.

Furthermore, during these schooling times, many parents may struggle to make ends meet and investing may be close to impossible. All this suffering can be reduced by planning for the future of your children on time.

Have you ever asked yourself these questions:

• What will happen to my kids if I get critically ill?
• What will happen to my children if I die?
• Who will take care of them when I am no longer there?
• Are they going to achieve their dreams in my absence?
• Are my kids going to be loved the way I love them?

Planning for the kids’ future

There are several ways a parent can save or invest for the children’s future. The following are some of the ways that have been proved to be efficient:

1) Life insurance

A life insurance is a contract between a policyholder (in this case the parent) and the insurer with a guarantee that in case of death of the policyholder, his/her beneficiaries will get payments from the insurer. For this to be achieved, a policyholder will have to pay premiums when he/she is still alive.

Life insurance premiums are cheaper for young people because the chances of dying at a tender age are less. Therefore it is wise to have a life insurance in your 20s.

Most debt lenders like banks make it a requirement to have life insurance before you take a loan or mortgage. This ensures that when you die, your kids will be debt free. At least they will mourn your death in peace without the pressures from the banks.

Life insurance may cover several financial obligations of your children depending on the size of your premium contributions. So you can rest in peace knowing your kids are in safe hands financially.

In South Africa check life insurance providers like Discovery, Sanlam and Outsurance. For those in Zimbabwe check the offerings from insurers like Zimnat and Old Mutual.

2) Long term investments

Fortunately for parents or future parents, there are several investments that are suited for your child’s future education. Many insurance companies offer some great products for your children’s education. As a start, check the PPS Education cover and Old Mutual Education Plan.

A tax-free savings account is one of the greatest option in South Africa. The current budget allows you save up to R 36 000 per year without being taxed. Previously it used to be a maximum of R 33 000 per year and a maximum of R 500 000 in your lifetime. Make it a goal to invest in your children’s future by taking advantage of tax free accounts.

In addition, you can opt for unit trusts to invest for your kids’ education. There are several choices of unit trusts you can choose from – I prefer stable and more secure unit trusts for short term commitments. This entirely depends on what type of goals you are targeting for.

Suppose you are investing for your 2 year old kid’s university, then you have more than 17 years of investing and you can go for risky investments considering that time is on your side. If you are saving for your child’s primary education, it may be wiser to go for low to medium risk unit trusts.

Furthermore, there are several investments you can use. For example you can invest in real estate or any income generating assets like shares. You can then use the income from these long term investments to pay for your child’s education. Planning for the future of your children is easier because you have enough time to invest before the money is needed.

Strategy

To ensure that you have enough money for your children, make it a habit to increase your investments when you are expecting a child. For example, if your monthly contribution for investments was R 2 000 then increase it to say R 3 000 so that each child will have enough.

If you are an investor in Cattle Farming for example, celebrate each birthday of your child by buying cattle specifically to cater for your child’s education. The more the kids you have the more you need to invest for their future.

Moreover, the most difficult thing to do is to start. It does not matter whether you start saving R 500 every month or even R 200 every month, what matters most is that you are making an effort.

In conclusion, you need to enjoy raising your children without being stressed by their financial obligations. Raising a child is very expensive and on average you need like R 20 million from infant stage to adolescence stage. Therefore, the earlier you save and invest for your child’s future, the easier it becomes. Kids will not stop you from fulfilling your goals if you are planning for the future of your children on time.