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Kids vs retirement savings

30 November 2015
3 minute read

balance kids and retirement

You know that you should be saving for retirement from your very first pay cheque, but after you have children you might find it harder to squirrel away as much as you did before for your golden years.

There is the high cost of education, extra-murals, that first car, maybe paying the deposit on their first flat and of course those financial emergencies when mom and dad need to help out with a loan.

To compound the problem, South Africans are already rated among the worst savers in the world, and only 25% of South Africans will be able to retire comfortably on their savings.

When do you draw the line, and say: “Enough! I am putting my financial needs first”?

Saving for retirement in different life stagesI asked a few friends who have children of varying ages, how they are managing to provide for their family while saving towards retirement:

“We never stopped or cut back on our investments when our child came along. I guess we both just worked harder to make sure we'll be okay.” Dylan Seegers (dad to a toddler)

“We both have pension funds at work and additional RAs. We’re managing okay now, but I don’t know about when our kids go to varsity.” Julie Venter (kids in primary school)

“I started [saving] with my first pay cheque. I need to up my savings, but based on varsity fees of R60k+ a year, it’s going to be at least three more years before hard saving begins. I decided some saving, even if not quite adequate, was better than no saving at all.” Ansie Vicente (daughter approaching university years)

We are still doing it [supporting our kids] 30 years on! I am hoping now that our youngest is set up [we can put more saving towards retirement] … but then it’s weddings and then grandkids! So the short answer: is you never stop spending on your kids.” Keren Hackeson (mom to young adults)

How much do you need to be saving?Ideally, you should be putting away between 10-15% of your gross annual income every year towards retirement, but it’s best to speak to a financial planner who can look at your individual circumstances and advise you.

I spoke to Wouter Fourie, who is the MD of Ascor Independent Wealth Managers and the winner of the FPI 2015/16 Financial Planner of the Year award, and importantly, is a dad himself.

Let’s say when you retire you need R16 000 per month to cover your living expenses. According to Wouter, then you will need about R4 000 000 in retirement savings.

How do you calculate this?

For every R4 000 you need per month when you retire, you will need R1 000 000 in retirement savings. So for R16k per month, you will need R4 000 000 to fill your retirement bucket, comfortably.

How can you do both?Wouter suggests three simple things you can do starting today, to start saving 15% of your income after tax while still giving your family the best life possible:

  • Budget together: Budget religiously and don’t be afraid to show your budget to your children. Let them understand the costs of life and financial responsibilities and get them to commit to helping you save for their and your future.

  • Teach your kids to be fishermen: It’s easy to give in when your kids ask you for money, or are in financial trouble, “but if you don’t teach them how to become fishermen and instead keep on feeding them your fish, they will eventually eat up all yours by the time they move out of the house!” Start when your children are young. Let them earn their pocket money, and when they are older, encourage them to work part-time and save towards that first car.

  • You don’t need to foot that education bill by yourself: Consider this: you don’t need to be the only one paying for your children’s education. Your child might be able to qualify for a student loan (especially if you sign surety) or a bursary. “Children tend to appreciate the value of education more if they don’t get it for free.”

For more inspiration, read our post on How to save when you have very little 

About StaceyStacey Vee is content strategist by day and toddler-wrangler by night. When she's not sharing hard truths about personal finance, she's baking. Baking from scratch can be expensive, by the way. Stacey lives, laughs and runs bubble baths in the city of Johannesburg. You can follow @MissStaceyVee on Twitter.

The views and opinions expressed in this article are those of the authors and do not necessarily represent or reflect the views of 1Life or its employees.

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