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Why your kids are not your retirement plan

20 October 2021
3 minute read
Family baking together

By Denise Mhlanga

The retirement savings statistics for South Africa are shocking: only one in every three South African adults (including pensioners) has some form of pension, 61% of pensioners can’t make ends meet, and only 10% of South Africans save enough for retirement.

And what that means, is that in many South African families, children are having to support their parents during retirement. This has given rise to a phenomenon known as the “sandwich generation”, where people in their 30s and 40s are responsible for looking after their own children as well as their parents, and struggling to make ends meet, often, let alone save anything for their own retirement. Money that could go towards their children’s education, buying a family home, or creating wealth for the next generation, has to be diverted to parents and quite often, other extended family members, and the cycle of poverty continues.

Don’t let this be your children! If you want to work towards financial independence in your golden years and not be a burden to your children, we have some tips.

Commit to doing things differently

Someone has to take the first step – let it be you! That means looking honestly at your finances, and ensuring you have a retirement plan in place.

Your financial adviser can help you to figure out how much you will need to retire, and what that means in terms of how much you need to save each month. If you can’t afford the whole month – because budgets only stretch so far – then pay slightly less until you can afford to increase the amount. A lesser amount is better than not saving for your retirement at all.

Starting late is better than not starting at all

If your financial adviser says you should have started in your 20s, don’t beat yourself up. Starting late is better than not starting at all. Make a solid commitment to yourself that you will prioritise putting money towards your retirement funds from your very next pay cheque.

Get the family on board

Prioritising your retirement may mean sacrificing some luxuries or little nice-to-haves. But this is about building a legacy for your children. So talk to them, explain what you are doing, and help them to understand that you are trying to build a brighter future for them – in an age-appropriate way, of course. This will help to set them up for financial success too.

Think about working for longer

People are living longer than most retirement funds are designed for, so if you’re in your middle years, start thinking about how you could work for longer. Some people even start a whole new career in their mid-50s!

Ensure you keep your workplace skills up to date for your current job, to ensure you have the best chances of being promoted, and if you are considering a brand-new midlife career, then use your evenings and weekends to start preparing so that you can work for as long as possible.

Children can still help their parents without having to sacrifice their own retirement plans

Earn extra income

You can also think about starting a side-hustle, so you have some extra funds to put away towards your retirement every month.

Stay active

If you stay active now and stay healthy, you can not only work longer and build up your investments a bit more, but also enjoy a more stimulating retirement – because you’ll have the health and vitality to do so!

Stay the course

Successful retirement investment relies on consistency. Put that money away every month and rely on the power of compound interest to build up your nest egg. The longer you can stick with your investments, the better they will grow, and the less you will have to rely on your children when it’s finally time to retire.

Planning for your retirement isn’t just about looking after yourself and your future – it also removes a financial burden from your children and has an impact on their future. Taking care of your own retirement needs will help them not only to create wealth, but generational wealth, and give future generations a financial advantage.

Frequently asked questions

  1. Commit to doing things differently by having a retirement plan in place with the help of a financial adviser.
  2. Start saving for retirement, even if it's late. It's better to start late than not start at all.
  3. Involve the family in the retirement planning process and prioritize saving over luxuries for the benefit of future generations.
  4. Consider working for longer to ensure enough savings for an extended retirement period.

Yes, it is crucial to talk to children about retirement planning, explaining that it's about building a legacy for their future financial success.

Consider starting a side-hustle to generate extra income for retirement savings.

Staying active and healthy allows individuals to work longer and build up their retirement investments further, leading to a more enjoyable retirement.

Consistent contributions to retirement funds and the power of compound interest lead to significant growth in the retirement nest egg, reducing the need to rely on children for financial support during retirement.

Planning for retirement not only benefits the individual but also reduces the financial burden on children, allowing them to create generational wealth and provide future generations with a financial advantage.

A financial adviser can assess an individual's financial situation and retirement needs, provide guidance on how much to save and help develop a retirement plan.

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