Which comes first, educating your children or saving for your retirement?

Maya Fisher-French
2019-10-21 08:00
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Tamsin, Thuli, Samke, Amanda and Nkosi - the five Money Makeover candidates ~

How do we find the balance between providing for our children and for our own future?

Without further education our children would be at a significant disadvantage in terms of finding employment. As parents it is our responsibility to provide for our children as much as we can, but how much is enough and where do our obligations to our children end? When do we need to start focusing on our own futures?

If you haven’t planned for your children’s tertiary education or you have cashed in your retirement funds along the way, there is invariably insufficient funds to meet both your retirement needs and your children’s education.

This was the challenge faced by two of last year’s Absa/City Press Money Makeover contestants. The Money Makeover challenge takes six individuals through a money bootcamp over six months in which they transform their finances.

Thuli

Thuli, mother of four and head of operations at an non-governmental organisation and Nkosi, and environmental affairs officer and single mum, both had adult children they were still supporting. With only 15 years to go until retirement they needed to start making tough choices.

Thuli had the responsibility of looking after her parents as well as educating her children.

Thuli shares her journey to financial freedom at this year’s final of the Absa/City Press Money Makeover

“Initially, I started saving in an education policy. But when there was an urgent need for money, I would cash up and cancel the policy. I did this three times and realised I was losing money. When the time came for my children to go to university, we used short term debt to fund their studies as our income levels did not qualify for NSFAS. This left us with no option but to utilise credit card debt and personal loans. We thought about student loans, but we did not want to burden the children with loans even before they start working.”

As a result, Thuli’s debt levels increased, leaving her with little option in terms of increasing her retirement provision.

Nkosi

Nkosi’s plan was for her son to study and become financially independent. However, he had not applied himself to studying and at 24 years old was still financially dependent on her.

As part of the challenge, both Nkosi and Thuli needed to review how they were financing their children. Thuli has two more children to fund through tertiary education and with a determination to cut back on her debt, she had to consider student loans.

“While I’m planning towards my retirement I had to consider my son, who is currently unemployed, in my plans. Though he has reached an independent stage, he is still dependent on me financially. You never seem to stop spending on your kids, as then you have grandchildren,” says Nkosi.

As part of the challenge, both Nkosi and Thuli needed to review how they were financing their children. Thuli has two more children to fund through tertiary education and with a determination to cut back on her debt, she had to consider student loans.

“I joke round with my clients faced with this kind of situation and say your children can get a student loan, but you can’t get a retirement loan. It’s not easy to think this way but it can help you to have enough when you retire,” says Nkosi’s financial adviser Funi Nemanashi, who adds that the worst thing you can do to your child is be a financial burden when they are trying to raise their own family.

Nkosi shares her journey to financial freedom at this year’s final of the Money Makeover

“If you run out of money in retirement and become a financial burden to your children, what happens to their children’s education and their retirement? You start a vicious circle that your family is never able to break away from.”

While as a parent you may feel that you are letting your child down by requiring them to take a student loan, it is far more cost effective than tapping into other forms of credit and it helps your child develop a credit record without having to take out “bad” debt like credit cards or store cards.

Their conclusions

“My two teenage kids will be going to tertiary education in a few years’ time. This does not give us time to adequately save for their education. In addition to this, we will be retiring in 15 years’ time. Now we are more open to student loans. We will stand surety for the kid’s student loans, and to ease the burden on them we will pay interest so that they only pay capital repayments when they start working. We will also look into bursaries and scholarships,” says Thuli.

For Nkosi it was about having a tough discussion with her son.

“There comes a time where the parent has to draw a line between a child and an adult. That is the point I’ve reached in my situation, where I had to draw a line for my son. He is now an adult and needs to stand on his own feet to start planning for his future.”

Thuli has also encouraged her children to work and fund their own lifestyles.

“My daughter is completing her honours degree and working as an au pair. My son completed his studies last year and is now working. Although he is earning a minimum wage and still staying at home, he is at least self-sufficient. I feel it is important as parents to cut the umbilical cord to our adult children as soon as possible. This will give us space to speed up and focus on retirement planning.”

Retirement

Apart from addressing her debt situation, Thuli also needed to review her retirement expectations. Most people do not have enough money to retire at age 60 or even 65, and due to longevity and relatively good health, most people want to work past this date – just not quite so hard.

Thuli’s plan is to retire from full-time employment at age 65 and then work until age 70 on a part-time basis as a consultant in her area of expertise.

“For me retirement is an opportunity to slow down, work according to my schedule. One of the reasons I am doing an MBA is to ensure that I keep relevant and on top of my game. This will ensure that my services and expertise will always be in demand in the sector. Working an extra five years will give my retirement funds more time to grow.”

Nkosi plans on retiring at 60 but will have side businesses to keep her busy and provide some cashflow. During the course of the Money Makeover challenge Nkosi consolidated her property investments and expects to earn about R38 000 a month from these properties in retirement. She is also focusing on adding more rental properties to the portfolio.

“One of the businesses is currently in the pipeline and it should be stable by retirement. Some businesses need full attention and that makes it impossible to run them while employed. So, during my employment time I am making plans to implement during retirement.”

During the course of the Money Makeover challenge Nkosi consolidated her property investments and expects to earn about R38 000 a month from these properties in retirement.

If Thuli and Nkosi’s story resonates with you and you are ready to commit and take the challenge, the Absa/City Press Money Makeover Challenge is once again open for applications. There are only six places available so only the most committed applicants will be considered.

The Money Makeover challenge

The Absa/City Press Money Makeover Challenge runs over a six-month period and candidates will receive expert help to get their finances in order and achieve their unique financial goals.

During the six-month period, each eligible participant will stand a chance to win incentive prizes upon reaching certain pre-agreed milestones.

At the end of the challenge, a cash investment prize will be awarded to the participant who best managed to remain on track and successfully realised their financial goals during the period.

The competition will run from February 2020 to August 2020.

All applicants need to meet the following criteria:

• Must be over the age of 18.

• Must have a transactional account with Absa wherein they deposit their monthly salary.

• Must earn a monthly salary/income of R20 000 or more (this can be a variable income if you are self-employed or a freelancer). Entrepreneurs with a small start-up business are welcome to enter.

• Must not be over-indebted to such an extent that they are blacklisted with legal action taken against them in terms of their debt.

• Must not currently be under debt review.

• Must be prepared to be filmed, have their photograph taken and have their first name appear in City Press and the social media channels of Absa and City Press.

• Must commit to a six-month personalised financial fitness programme

• Must successfully complete all the tasks and reach all the goals assigned to them.

If you are interested to participate, send your responses to the following questions to us by no later than October 25.

• Why would you like to participate and what do you hope to achieve should you be selected to participate?

• What are your main financial pressures at the moment?

• Are you married and do you have children?

• What keeps you awake at night?

• What has been your worst financial mistake?

• What is your big dream?

Also send your full name and surname, age, region ID number, Absa account number as well as your current monthly budget (income and expenses) by no later than 25 October 2019.

To find out more about the Absa/City Press Money Makeover Challenge you can read about last year’s contestants here

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