Monthly Archives: September 2016

Bank charges on paying

In South Africa’s somewhat peculiar banking system, monthly charges for transactional accounts are a given. But is the few hundred rand you’re paying per month (if you’re lucky!) the best possible deal?

The first question you need to answer is whether you value having a ‘platinum’ or ‘private clients’ account with all the “value-adds” these offer?

Things like lounge access, bundled credit cards and a ‘personal’ banker are must-haves for some in the upper middle market. On the other end of the scale are basic, no-frills bank accounts (like Capitec’s Global One (and the clones from the other major banks)), but the truth is that most people need something a little more comprehensive than that. There’s likely a home loan, almost certainly vehicle finance and definitely a credit card.

So, do you need a ‘platinum’ (Premier/Prestige/Savvy Bundle)-type account? Do you actually use or need those value-adds? Or, do you enjoy the ‘status’ of having a platinum or black credit card? (Here, emotion – and ego – comes into the equation….)

This is an important question to answer, because the difference in bank charges between a more vanilla bundle account and ‘platinum’ is easily 50%!

While banks try to shoehorn you into product categories based on your salary or profession, there’s nothing stopping you from moving to another product (or refusing those ‘upgrades’). From a personal perspective, the only reason I have an FNB Premier (i.e. platinum) account (not gold) is because I do actually make use of the ‘free’, albeit diminishing, Slow Lounge access. And, the eBucks rewards I earn on this account are the most lucrative of the lot, based on the products I use, my transaction habits and spending patterns. (‘Upgrading’ to Private Clients is a mugs game because the thresholds for ‘earning’ rewards are significantly higher, to match one’s status and earnings, of course!)

Once you’ve answered this question – which is more important than most people realise – the next step is to figure out whether a bundled account or pay-as-you-transact one makes the most sense. Most of us enjoy not having to ‘worry’, so we readily sign up for the all-in-one package without actually understanding the differences in pricing.

Save more money for their kids

With the start of 2017 looming, many parents may have started to consider the cost of their children’s school and tuition fees for the next school year. While families have a number of financial commitments to attend to every month, this is the time of year where school funds are often moved to the top priority to ensure that the family is financially prepared for the expenses that accompany a new school year.

Saving for a child’s education requires careful consideration and proper planning.

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.

Great gift that keeps on giving

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.