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Give freely and wisely to your children this and every Christmas

01 December 2010 Alexander Forbes Financial Services

Those beautifully wrapped presents under the Christmas Tree, the excitement in the home and the delight on children’s faces as they unwrap their gifts on Christmas morning are some of the most special moments in any parent’s year.

Yet parents often despair at the amount spent on Christmas presents as well as the number of gifts that many children receive these days.

While presents are fun and an important part of Christmas, especially for children, “parents could consider reducing the number of presents and investing some of that Christmas spend in making a long term difference to their children’s lives and prospects” says Linda Sherlock, Head of Advisory, Alexander Forbes Financial Services.

As parents plan their Christmas budgets and begin purchasing presents, it would also be good to reflect on how they could do something different that will make a difference in their children’s lives later on.

For example, “if we spent even a small part of the present money on a unit trust or savings vehicle for our children, which we added to each Christmas along with some of the birthday money they receive during the year, this would help them greatly later on – when they buy their first car, need funds to study or decide to take that gap year abroad that they’ve always dreamed of” says Sherlock.

The below chart shows the return on putting away a R1000.00 each Christmas for 18 years, with a further R150 added each month - assuming the money grows at 8% with inflation at 3%.

Lump Sum for 18 years

R 1,000 per year

Monthly contribution for 18 years

R 150 per month

Estimated Investment Return

8%

Inflation

3%

Value after 18 years

R 74,293.23

Value after 18 years allowing for inflation

R 43,639.45

“Running the numbers shows just how significant an annual festive season contribution, with a few top ups during the year, can be” says Sherlock.

And if the contributions were increased by 5% per annum the end value would be enhanced as follows:

Value after 18 years

R 103,443.89

Value after 18 years allowing for inflation

R 60,762.38

Helping kids to realise their dreams by making the simple decision to put slightly fewer presents under the tree and investing the money saved could one day be the best gift of all.

Moreover, when they are older and remember those “warm family Christmas mornings, they will carry with them as they become parents the forward thinking instilled in them by our generation which showered them with joy each Christmas - while wisely equipping them to save and invest for their own futures and dreams” concludes Sherlock.

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