Having children is an expensive exercise – but with careful planning and a good knowledge of the life stages of your kids, you can have a worry-free financial journey with them. René Roux suggests 5 financial tips to implement during their various life stages.
Life stage 1: Pregnancy to infancy
The day you decide to become a parent is the day to start your financial planning. There are many expenses to provide for before the baby arrives, such as furnishing the baby’s room, a pram and the necessary basics, such as clothing and toiletries.
Handy tip: Avoid using your credit card too widely and don’t let debt spiral out of control before the baby arrives. Contribute monthly to a ‘baby kitty’. If you save R1 000 per month for the duration of your pregnancy you will have a nice lump sum to cover the initial expenses and you won’t have to use your credit card and pay the interest that comes with credit card debt. Even better, start a baby kitty as soon as you start planning for a baby.
Life stage 2: Pre to primary school
When your kids start school you start paying school fees and other associated expenses. Books, uniforms, extra-mural activities and outings are added expenses that are generally not included in the fees. With this technically savvy generation, laptops are required more and more in classrooms for school work or powerpoint presentations.
Naturally you want your child to partake in all activities so they can find out what they most enjoy and what they want to pursue further. The equipment for these hobbies can be costly. If you both work, it is likely that you will have to send your child to after-care, or hire an au pair. All these expenses take a hefty chunk out of your monthly income.
Handy tip: Take out an education plan early in their life. The earlier you start the lower the monthly contributions will be, making it more affordable. This money can be used to cover their schooling and/or tertiary education, or could be a lump sum for them to buy a car or start a business one day.
Life stage 3: High school
As children get older their expenses increase. Their ‘toys’, clothing, books and school fees become more expensive. They take their hobbies more seriously, and sporting tours, team uniforms and upgraded equipment become added expenses. There are also more school activities such as carnivals and outings that you want them to go to, to foster a balanced and fulfilling school life.
Handy tip: As your kids get a bit older, suggest that they get a casual job to earn extra cash to pay for their extra activities, or encourage them to render a service or sell something at their community craft market. Apart from the financial benefits, this subtlety introduces them to the working world and develops their people skills.
Life stage 4: Tertiary education
They might be temporarily out of the house and off to varsity but their expenses are as present as ever! Expenses include varsity residence or a flat (plus furniture), a car or transport, flights during varsity holidays, books, and pocket money for clothes, toiletries, food and general living expenses (optional).
The good financial savvyness you taught your kids from a young age will benefit them now, as they will need to manage and balance their expenses on their own.
Handy tip: At this stage they should be working part-time to cover some of their own expenses. The benefits of working part-time while studying are immeasurable. They become self-sufficient, confident, financially savvy, well-rounded and independent adults and they gain valuable work and life experience that will serve them well when they enter the working world.
Life stage 5: The working world
Just because your children have entered the working world don’t assume they will move out immediately. As their starting-out salary is likely to be low, they might opt to stay at home for as long as possible or until they can afford to live on their own.
Handy tip: Whether you need the money or not, ensure that they pay you ‘rent’ (even if it is minimal). This amount can contribute towards food and sundry expenses. This prepares them for when they move out and gets them into the habit of paying their way.
Enjoy the different stages of your children’s life as each stage is fleeting and before you know it they will be moving out of the house.
Plan accordingly for these stages to avoid unnecessary financial stress and worry.
Information provided by René Roux, head of Sanlam Liquid
Sanlam Life Insurance Limited is a licensed Financial Services Provider.
For more information visit, www.sanlam.co.za