This is default featured slide 1 title
This is default featured slide 2 title
This is default featured slide 3 title
This is default featured slide 4 title
This is default featured slide 5 title
 

Monthly Archives: October 2016

Give the Gift

This time of year sees both children and adults preparing their wish-lists for the upcoming festive season. But as many South Africans continue to grapple with rising debt, now is a good time to shift the focus from giving material items to providing future financial well-being.

Giving a child an investment as a gift will not only promote a culture of saving from a young age, but will also show them how you can make money grow.

There’s a powerful story of one customer’s commitment to leave a legacy for his family, and the value of sound financial advice. In November 1968, a customer made an initial deposit of  R400 into the Old Mutual Investors’ Fund and 48 years later, his investment is today worth over R600 000.

More precious than the value of his money, however, was the culture of saving and the legacy that he passed on to his children and grandchildren. On special occasions such as Christmas and birthdays, he invested a set amount of money on his children’s or grandchildren’s behalf. With this investment, his daughter was able to provide for her daughter’s schooling.

If South Africa is to develop a generation of financially savvy adults, it is crucial to not just talk about it, but actually practise good money habits. It is important to teach your children about money, and the festive season – with the spirit of giving – is a good time of the year for parents to set a good example. Teach your children about the importance of giving within your means, as well as showing them the value of relaxing with family and rewinding after a long, hard year, while respecting the value of hard-earned money.

Families should consider starting a financial tradition of their own. Set a reasonable budget for gift giving this festive season, and instead of spending all your money on gifts that are likely to fade, go missing or be forgotten, speak to your financial adviser about starting an investment in the name of your children.

When children become old enough to understand more about money management, parents should involve them in the process. Teach them the principle of compound interest and explain why putting money away today means they will have more money tomorrow. Help them set a budget for the money they’ll receive over the festive season, encouraging them to spend a smaller percentage today, and investing the rest for the future.

Tips to Save Their Kid’s School Fees for Parent

Here are some tips below for parents to ensure that they have planned appropriately for their children’s education costs:

Start early

Parents should start saving for their children’s education as soon as they possibly can. Many people do not consider, or are not aware of, the great advantages of compound interest, and how accumulated savings grow over several years when invested properly. By investing from an early age, parents will eliminate the financial worry of not having sufficient funds to give their children the best education possible, as the funds in their investment will grow every year.

Automate savings

The best way for parents to ensure they are regularly contributing towards their children’s education is to open a dedicated savings account and set up a monthly debit order. This way the parents will automatically save money every month towards this cause. However, they must have a strict rule in place to never withdraw any money from this account if it is not related to the child’s education.

Explore ways to get discounts

It is advisable to do some research and contact schools to find out whether they offer financial incentives that could result in long-term savings. Many schools offer a discount if the fees are paid as a once-off amount in advance. Some also offer a reduction when there is more than one child attending the school. These types of savings can make a big difference over an 18-year period.

Include education funding in the financial plan

It is important that parents include education funding in their overall financial plan. These expenses have to be accounted for as part of the monthly household expenses to determine how it will affect the family’s overall financial position. When it comes to developing financial plans, it is usually a good idea to consult a reputable financial planner who will be able to develop a solution for the client to ensure that they have provided sufficiently for their children’s tuition fees and related education expenses.

With the cost of education increasing every year, parents are faced with increased expenses for the privilege of sending their children to school. School fees are a big financial commitment, but with the right advice, families do not have to see this expense as a financial burden.

Increase Your Wealth with One Way

What is human capital?

Human capital is the combination of skills, knowledge and abilities you have that will enable you to generate income over your working life. Nearly all of us have an ability to generate some income but very few people consistently invest in themselves so that they can increase their earning potential over time. According to the Federal Reserve of San Francisco, university graduates generate R16 million more income over their careers than non-graduates. This might give some context to the #feesmustfall campaign in South Africa.

If you choose to invest in yourself, you need to ensure that your skills and knowledge remain relevant and adaptable to changing economic conditions and an evolving business environment. You should regularly review whether you need to add to your skills or knowledge-base. Additionally, you need to be honest enough with yourself to be able to decide if you need to change careers if you are in a dead-end street. For instance, I would not consider newspaper printing as a long-term career option!

Specialise but not too much

Some careers reward those who specialise but one should always be careful of becoming too narrowly focused in your career. For example, deciding on an academic career researching the mating habits of albino penguins in the Southern Cape might not ensure a long-term income. However there might be less risk in being the orthopaedic surgeon who specialises in surgery of the shoulder in South Africa. Many young people strive to be a manager in a large corporate. This might be the most risky career choice one can make. Managers are essentially generalists and are often the first people to be fired in a merger or downsizing. If you plan to work in a corporate, you might do better focusing on being a revenue generator or product specialist.

Not only for academics

If you are not academically inclined or you have no interest in tech, you could always consider specialising in old world industries. There is a massive shortage of plumbers, electricians and general handymen. Now that more people work in services industries, there are many fewer people who can work with their hands. This provides an ideal opportunity for reskilling yourself if you have the inclination.

In the age of mass production and “mass specialisation” provided by the internet of things, it should not be surprising that there is a major shortage of people who can build or create objects with their hands. I believe craftsmen who can make handmade items such as furniture or master builders are in big demand. It does not surprise me that craft beer, artisanal baking and coffee are becoming major industries. More people are becoming interested in where their food and drinks are made and this includes where the ingredients are sourced. This is the type of trend that is likely to suit those with old world skills and when skills are limited and demand is increasing, your earning ability increases rapidly.

It does not matter what you do today, you need to be conscious of how you can grow yourself and possibly change course when required. Viewing yourself as an income generating asset that requires work and maintenance is probably your best investment. Charlie Munger said of his business partner: “Warren Buffett has become one hell of a lot better an investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge we had, the record would have been much worse than it is. So the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.”

Tips for Women’s Finance

You need your own will and have to understand the implications of your partner’s estate planning

Chairperson Ronel Williams, says in practice, Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected.

This could have far-reaching consequences.

Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future, should the situation change, she says.

One example is in cases where a woman’s husband passes away, leaves the bulk of the estate to her and she dies shortly thereafter.

“So then suddenly she does end up with having quite a sizeable estate and her will actually doesn’t reflect the position for her changed financial circumstances.”

She could for example have provided in her will that her estate devolves on her children. If they are still minors (under 18 years) and inherit small amounts, this does not necessarily pose a problem. If, however, her estate is sizeable, the children’s inheritances have to be paid to the Guardian’s Fund unless her will provides for a trust.

While the law allows parties to have a joint will, Fisa usually advises against it, Williams says, mainly for practical reasons. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

Men and women living together are not automatically treated as ‘married’ under the law in case of intestacy

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

Williams says in terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

While men and women who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

“Partners in such relationships do not automatically qualify for spousal benefits.”

In terms of a Constitutional court ruling, such partners cannot be regarded as spouses for purposes of intestate succession.

Contradictions

Because the Marriage Act regards marriage as a union between one man and one woman, and same sex couples do not fit the criteria, they were previously not regarded as spouses (before the introduction of the Civil Union Act).

Williams says the Civil Union Act, that came into effect on November 30 2006, allows parties to enter into a civil union, which gives them the same rights as a married couple in terms of the Marriage Act. The Civil Union Act applies to homosexual and heterosexual couples.

“If a same sex couple or heterosexual couple enter into a civil union under the Civil Union Act, they are regarded as married for purposes of the law and they will then also be regarded as a spouse,” she says.

Williams says the current position – the result of a court ruling – is that where a same sex couple live together but have not entered into a civil union in terms of the Civil Union Act, they can inherit from each other when one of the parties dies without a will.

At the time of the court case, the Civil Union Act was not in operation yet, and the court argued that because the parties were not allowed to enter into any type of union to formalise their relationship, they were entitled to protection.

“So it was purely because they didn’t have the option to marry, that the court felt our laws had to protect them.”

But since the Civil Union Act is now in force, should same sex parties still be regarded as spouses if they have the option to enter into a civil union, but choose not to do so?

Williams says because this was a Constitutional Court ruling, the ruling stands.

“So at the moment, if you have same sex parties who did not enter into a civil union and one party dies without having made a will, this court ruling will actually apply and it means they will be regarded as spouses and they will still be protected.”

This is a contentious position, as heterosexual parties who live together but do not enter into a civil union cannot inherit if one party passes away without a will. Since these parties had the option to get married but chose not to do so, the legal position is that they do not need protection.

The introduction of the Civil Union Act puts heterosexual and homosexual groups on equal footing, but because of the Constitutional Court judgment the groups are treated differently for purposes of intestate succession.

“It is one of those matters where we are all waiting for some Constitutional challenge but it just hasn’t happened yet.”

Williams says it is important for heterosexual partners to know the fact that they are living together does not give them protection under the laws of intestate succession.

“Unless they enter into a civil union or get married, they cannot inherit from each other when the other one dies without a will.”

Williams says it is therefore crucial for a woman in such a relationship to ensure she and her partner draft wills to protect one another.