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How to empower and secure your child’s future in uncertain times

15 November 2023 Old Mutual

World Children’s Day will be celebrated on Monday, 20 November – a fitting time for parents and parents-to-be to carefully consider how they can secure a solid and empowered future for their children in a fast-changing world.

Old Mutual Personal Finance Certified Financial Planner® Sean van Zyl advises that with challenges such as the rapid advances in artificial intelligence and seismic shifts in global power relations, among others, the world is changing at a dizzying speed.

“In these uncertain times, parents must ensure they make the right decisions and invest in financial solutions to provide their children with a secure future,” says van Zyl. “One of the biggest trends in education in South Africa recently is that there is now a more globalised outlook on it. Many parents are looking for international opportunities for their children and sending them to universities overseas to be more competitive in the job market.”

Another trend van Zyl identifies is the accelerating speed of technological innovation and parents' desire to help their children develop multiple skills to keep pace with the change.

“The fast-moving growth of technology in all aspects of our lives means that kids are expected to have advanced computer skills, resulting in parents having to pay for extra classes, such as coding from a young age. Now more than ever, parents are confronted with the challenge of finding the best ways to afford to pay for the need to upskill and educate their children for the future,” he says.

Choosing the right mix of financial solutions

Given the array and complexity of education plans and policies available on the market, parents need to seek professional advice from trusted financial advisers when planning for their children’s future needs.

Van Zyl says that while traditional education policies are essential to guarantee a child’s academic future, they should form part of a more holistic approach to financial planning. The key, he says, is the creation of a suitable and practical education funding strategy and plan for parents that will ensure comprehensive and future-proof financial planning for their children. This will also include risk planning to ensure the child’s educational needs are still met if a parent becomes ill, disabled, or passes away.

“Adding a versatile savings vehicle to a family’s financial planning portfolio can provide flexibility for a child’s unforeseen career choices and opportunities. This step will ensure that sufficient finances are available to pay for any opportunities that might arise. For instance, if a child is not academically inclined but somewhat entrepreneurial in spirit and would prefer to start their own business than go to university, money will be available to provide them with capital to start the venture.”

He says this way, these savings can easily be accessed to cater for any activities – such as buying a car, starting a business, or investing in the stock market, among others – the children might want to explore when they reach the right age. To do this most effectively, parents must engage with their financial adviser to budget, prioritise their needs, and factor in all possible scenarios and potential future obstacles as well as opportunities to ensure their plan is achievable, affordable, and flexible.

Financial education is the game-changer

“We also need to make sure that whatever arrangements we make – whether it’s putting an investment in place or a policy – we check those policies at least once a year and make sure that it’s on track and there aren't any limitations in terms of getting access to the money when it is needed or incurring penalties for needing to access it sooner,” says van Zyl.

“Keeping track of your savings and investments’ will assure you that you are saving enough for your children’s future and give you peace of mind knowing there is enough money to allow them to reach their full potential, not only focusing on performance but making sure the contributions and annual escalations are adequate.”

Van Zyl says it is also essential that parents teach their children about money from an early age.

“Some people believe that age three is the right time to teach kids about delayed gratification. They need to learn from a young age to make decisions about financial matters to secure their future financial wellness.

“Instead of allowing them to go into a shop and choose whatever they want, instead say: ‘You’ve got R50 to spend. These are the three things that cost R50. Which one would you like?’ “They must learn to understand what money is about. Because the last thing you want is to make your child believe that you’re an ATM and give them money every time they come to you,” he concludes.

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