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Personal Finance | Smart moves for a new mum

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If you cash in your retirement fund at the age of 30, you will have to save 23.4% of your salary to retire comfortably. Rather, work out a debt repayment plan through your monthly budget and bonus windfalls. Photo: Archive
If you cash in your retirement fund at the age of 30, you will have to save 23.4% of your salary to retire comfortably. Rather, work out a debt repayment plan through your monthly budget and bonus windfalls. Photo: Archive

PERSONAL FINANCE


DON’T SABOTAGE YOUR RETIREMENT

While you are on maternity leave, you may need to cut back on some expenses, which could include premiums on your pension or retirement annuity policies. Make sure you reinstate these once you return to work.

If you are planning on being a stay-at-home mum for a while, continue to contribute something towards your retirement. It may be tempting to cash in your retirement to fund a period at home, but this will set you back substantially. You do not want to be a burden to your “bundle of joy” in your old age.

If you cash in your retirement fund at the age of 30, you will have to save 23.4% of your salary to retire comfortably. Rather, work out a debt repayment plan through your monthly budget and bonus windfalls.

IT’S NEVER TOO EARLY TO STARTSAVING FOR EDUCATION

The earlier you start saving for your child’s education, the more time you have for the power of time (compound interest) to grow. A great way to kick-start an education fund is to ask family members and friends to contribute to an investment fund rather than buying gifts for your child.

If you can afford to, in addition to an education fund, consider opening a tax-free savings account for your child.

READ: The perfect Mother’s Day guide for gifts for single mums

This will give them a good start financially when they become an adult. It is also a great way to createintergenerational wealth.

ADJUST YOUR LIFESTYLE

Your priorities change when you become a parent and so too will your budget. You need to review your spending and debt obligations. You do not want to be in a situation one day when you cannot give your child a decent education because you are paying off your car debt.

You may find that money you were spending on yourself now goes to spoiling your child. Remember, the best gift you can give your child is your financial independence and to create intergenerational wealth.

REVIEW YOUR LIFE COVER

You now have a financial dependant. Make sure you have enough life cover to provide for your child’s education and living costs should something happen to you.

If you have benefits with your employer, make sure the nomination forms are updated to include your child.

Your company’s life cover is the cheapest way to make sure you can provide for your children, but don’t ignore disability or critical illness cover. This is vital even for stay-at-home mums. If you are disabled or become critically ill, your family will have increased medical costs to carry.

Your partner may also have to reduce his or her working hours to care for you and the family.

READ: New mom brings her premature baby back to life after breathing complications

WRITE A WILL

The most important document you can have as a mother is a will that protects your child.

In your will, you can stipulate the guardian of your child and you can include a letter of wishes regarding how you would like your child to be raised. You should also consider including a testamentary trust if you have assets valued at more than R1 million. This trust will protect the assets for your child until they reach a specific age stipulated by you.

Companies such as Capital Legacy and Discovery offer wills that include an insurance policy that covers the cost of winding up your estate and managing the ongoing testamentary trust.


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