Liberty Newsletter September 2018 View the newsletter online

Build a positive legacy with holistic financial planning

By Kobus Kleyn, Certified Financial Planner, Liberty

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South Africa is a wonderfully diverse country, with people from various cultural backgrounds. While Heritage Month is a time to celebrate our multicultural differences, there are many financial desires that many of us have in common. Leaving a positive legacy for our children, is often one of these desires. To do this successfully, there are certain challenges that we, as a country, must overcome.

According to the Association for Savings and Investment South Africa, the average South African is under-insured by 59%, which means that financial advisers and their clients have a lot of work to do to close this ever-widening gap. Underinsurance, particularly for life insurance is a serious problem that can hamper your ability to leave your beneficiaries financially stable in the event of your death.

In addition, Statistics South Africa tells us that unemployment levels in the country are at 26,7 % in 2018 and around six million people are unemployed. It’s even more concerning that 36,7% of the 26,7% have actually stopped looking for work. The worst statistic is the unemployment rate for the youth younger than 35, which is as high as 35%. This number is increasing due to the challenging economic situation in the country. For this reason, it’s also important to consider that you have the right level of income protection that can alleviate the financial pressure of losing your job due to retrenchment.

Finally, debt levels in the country are seriously high. Credit bureau data from the National Credit Regulator (NCR) places impaired credit records at around 39,1%. The NCR data indicates that credit and store card debt that’s well over 120 days is growing. This can’t be good news for families who are already battling with disposable income and budgets deep in the red. Paying off this debt could be a real challenge for families.

Not only should we have the right risk cover in place suited to our families’ needs, but we also need to educate our children on the importance of financial planning so that they have the right level of knowledge and experience in place to manage their own money effectively once they start earning an income.

This is where the true value of financial advice comes into play

A holistic financial plan should help families to manage the economic challenges currently facing South African households and promote financial literacy in younger members of the family. Children look to their parents for direction in life. With young children, the goal is for parents to create strong financial habits that they can mimic as they move through each life stage. I believe that it’s better to bend the little tree while you can in its young stages, before it’s older and no longer pliable.

The good news is that there are financial strategies you can put in place throughout your child’s financial planning journey. Work with your financial adviser to divide your children’s financial plans into their relevant age categories for example, ages four to eight, nine to 13 and 14 to 18. It’s important that you do not over-complicate the financial plan and make it relevant to your child’s personality and spending habits.

The best piece of financial advice I’d give to parents who want to teach their children about money is: start as early as possible. It’s also important to involve professionals, such as the family financial adviser, from day one. This advice might carry more weight coming from an independent, qualified financial expert. Doing this ensures that the learning curve is more sustainable as you create a sense of responsibility and independence in the child.

I firmly believe that financial planning for your children is not a one-time discussion. It’s a process that you need to nurture throughout the children’s lives. So, if you want to set your children up for maximum financial success, find a financial adviser who can deliver on your expectations. Together, you and your child can implement the right strategies to get them into the driver’s seat on their journey to financial success.

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The information contained in this communication, including attachments, is not to be construed as advice in terms of the financial advisery and Intermediary Services Act of 2002 ("FAIS") as the writer is neither an appointed representative of Liberty, nor a licensed financial services provider as contemplated in FAIS. Please consult your financial adviser should you require advice of a financial nature and/or intermediary services.