Estate Planning for New Parents

You are planning to start a family, but how do you ensure that you cover your child’s financial needs should something happen to you and your spouse? By Jessica Anne Wood

Hein Klokow from Secure Legacy highlights that one of the most important conversations you need to have with your spouse and your estate planner is how you will provide for your children’s financial needs in the case of death of one or both of you.

But where do you start? Leopold Malan, executive director of BrightRock, stresses the importance of having your health cover and long-term insurance cover in place when starting a family.

Your parental concerns and plans will differ for parents with young children, to those with adult children. Furthermore, Klokow points out that those with handicapped or special needs children, or with children from a previous marriage will have additional considerations.

The first thing you should do when considering estate planning is to contact a qualified financial advisor who can advise you on your financial situation, and the potential financial needs of your children upon your death.

What financial products should you have in place?

Klokow emphasises that a common concern with minor children is how to provide sufficient income for them. Another is how assets will be managed and preserved to provide the financial resources needed until they reach adulthood.

Will Keevy, head of insurance at Insurance Busters, notes that the first thing parents should do is get a will with a testamentary trust attached to it.

“A testamentary trust is basically if something happens to both parents, then instead of the money going to the guardian’s fund, which is run by the government, it goes into a trust which is managed appropriately for the child, until a specific age, be it 18 or 21. It’s better managed, you don’t want the government to manage the kid’s finances. Whatever is left behind (finances after parents’ death) will then be applied to bringing up the child. It’s also important if you are going to have a guardian, the guardian needs to understand what you have in place,” says Keevy.

It is also important to have adequate risk cover in place. This can include things such as life cover and disability cover to other financial products. Keevy points out that you will need to insure your income so that it can be allocated to help with the education of that child and their other financial needs in the event of your death. Setting up a trust in your will does no good if there is nothing to invest in it when you die.

Malan points out that it is also important to prepare for any loss of income you may encounter. You should have long term insurance in place that is flexible enough for you to add cover as you start and add new additions to your family.

“Also remember that an unexpected complication with your child – like a heart defect, for example – can have a significant burden on your finances. There are long term insurance products that can provide cover for childcare in the event of a child’s critical illness, enabling you to be with and to support your child during critical periods like these,” reveals Malan.

The next thing you should consider when you have a child is saving for their education. This is often something that parents prioritise first, but Keevy stresses that while saving for education is important, you need to take care of the risk first. “You will always make a plan to get a child educated if you don’t have the savings,” says Keevy.

What about any property left behind?

Any property that parents’ may own needs to be considered in estate planning. What you decide will largely depend on where the child will live in the event that both parents pass away. Keevy notes that it is unlikely that in this type of situation a child would remain in the family home.

“I would rather sell the property and invest that money to help the guardians look after the child. You don’t want to dump your child on a guardian without any financial support, it’s also not right,” says Keevy.

Guardianship

When it comes to minor children, it is important to decide who you want looking after them in the event that you or your spouse die. It is vital that you discuss your decision with the person you have in mind to ensure they are willing to take on the responsibility.

“It is important to choose a guardian or set of guardians that are able to provide emotionally, financially and physically for your children, and who have agreed to be guardians for your children in the event of your untimely death. If you have your estate planning and life cover in place that makes provision for your children’s education and day to day living expenses (factoring in inflation, as well as the significant jump in expenses for tertiary education), you can have a lesser emphasis on the financial strength of your chosen guardian. Your choice of guardians should also be stipulated very clearly in your will,” highlights Malan.

There are a number of things you need to keep in mind when choosing a guardian:

  • The guardian needs to know who they are.
  • Explain the responsibilities that a guardian will have.
  • Explain what precautions you have taken to care for your children in the event of your death.

“If anyone makes you the guardian of their child, ask if they have a plan in place. It’s all well and good being a guardian, I will bring up your kid as best I can, but you can’t put that financial burden on him/her. Very few people think of that,” notes Keevy.

When choosing a guardian, also be cautious of the age of the people you are choosing. While you may want your parent to be the guardian of their grandchild, are they the most suitable candidate?

“If your parents are younger, fair enough, but you have to take into consideration, by going and living with grandparents think about the environment you are going to grow up in, versus growing up with other kids,” says Keevy.

With older guardians health might also be a factor that could impact the desired guardian’s ability to care for your child. However, it is possible to create a hierarchy when choosing guardians. Here you will have your first choice of guardians (for example your parents), but if they are unable to unwilling to care for your child, you have a second person appointed to the role.

If a guardian hasn’t been appointed, Keevy explains that the State will get involved. “What will probably happen is they will go to the closet family. But do you want that decision to be made for you by somebody else?” notes Keevy.

Klokow adds: “Every family is different with its own circumstances. It is essential to have an up to date will. Speak to a specialist estate planner to assist you in weighing up the advantages and disadvantages of different estate planning structures, taking into account all the relevant factors applicable to your situation. A rushed decision may have irreparable consequences for your loved ones.”

This article first appeared in Just Money on 8 June 2017. Click here to read the original version.

If You Value Your Children, Teach Them the Value of Money

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The biggest gift we can give our children is not that brand-new smartphone or a luxury holiday by the sea. It’s an understanding that learning to look after your money is a legacy that will last a lifetime. By Maya Fisher-French

When you become a parent, you are faced with the reality that you have to form a value system within which you will raise your children.

In a world that has become increasingly materialistic and where people are judged not on the content of their character, but on their exterior image, how do we raise children to be financially sensible and to appreciate how much they have?

Upon hearing that I was buying a cellphone as my son’s birthday present, an acquaintance asked me “are you getting him an iPhone”? No, I am not buying my 16 -year-old son a R13,000 phone!

The reality is that some of his friends do have iPhones, but some do not. My son is not particularly brand conscious so it is not an issue, but if it was, that is the sort of thing he would have to buy himself.

If I raised a child who believed that his whole social well-being depended on the type of cellphone he had, I would have failed my own value system.

Need vs Want

Then again, my younger son told me that he “needed” the latest PlayStation because the game he played at his friend’s house is only available on that platform and not on his Xbox.

I just laughed and said: “Really? Need?” Fortunately I did not launch into the “you spoilt child” speech that was forming in my mind because my son understood exactly what I meant. He understands the difference between “need” and “want” and why that matters.

I have found that the best defence against so-called peer pressure and children’s demands is to bring them into the real world when it comes to money.

Most children have no real idea of what things cost relative to the income coming into the family. They also have no idea of how much it costs just to live each month!

I don’t have all the answers and only time will tell if the financial education I impart on my children will bear fruit one day, but I have formed some sort of plan and value system and so far my children seem to be on board.

It’s okay to talk about money

We talk openly about money and finances. My children know we have a budget and what we are budgeting for.

For example, my sons know that this year our goal has been to replace our old car (and they know that we only buy cars for cash) so other luxuries will take a back seat.

We set limits on how much we will spend in total on birthdays, including the gift and party, and only pay for one additional extra mural a term, so they have to choose carefully which extra murals they want to do.

They are hardly deprived, but setting limits creates the awareness that money is a finite resource and they have to make wise decisions on how it is spent.

The best way to learn is by doing

My children received pocket money from a young age, and through this they learnt to save up for things they wanted. Probably the best lesson they have learnt is that by the time they have saved for the item, they no longer want it – their interests are short-lived.

As a result they have more money saved than they planned. As adults, too often we are still paying off our credit cards long after the enjoyment of the new purchase has faded.

What children really want is financial security

Living beyond your means in order to give your children a lifestyle you did not have, is not a gift. It is a burden.

Believe me, I was raised in a household full of financial stress so I know that children can feel the stress in a household and it will create negative money memories for them so that in adulthood they may inadvertently repeat the pattern.

Showing your children you are in control of your finances is the best way to make them feel safe. Share with them how money in the household is allocated and allow them to have some input into the budget allocations.

It will make them feel empowered and also make it easier to have the conversation around “wants” and “needs” and how they can work towards their “wants”.

Part of that security is making sure I have sufficient insurance in place to provide for them if I am unable to contribute to the family financially. I have also worked at putting away money for my retirement so that I do not have to depend on them in old age.

Leaving a legacy

My father died when I was still young and we were left in financial dire straits. There was certainly no inheritance or financial legacy, but I did still receive a good education.

That was invaluable and has allowed me to build my own future. We have one overriding financial priority when it comes to our children: providing them with best education we can afford.

Afford, however, does not mean taking on debt or neglecting our savings; it means other financial sacrifices like not driving new, financed, cars.

* Maya Fisher-French is an award-winning financial journalist with a flair for cutting complex money matters to their core. Find out more on  mayaonmoney.co.za. Maya on Money, Your Money Questions Answered, is published by NB Publishers.

* The opinions expressed in this piece are the writer’s own and don’t necessarily reflect the views of BrightRock.

This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes.

The Big Secret to Making Sense of Your Teens

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Given that every adult is a former teen, you might think it would be a simple matter for parents to understand and communicate with their adolescent offspring. But life is a little more complicated than that, as our BrightRock Iris session discovers. So what’s the big secret to making sense of your teenagers in an age of change?

“Mom,” said Klara Göttert, a bright and lively 14-year-old with a penchant for parkour, the art of running, clambering, and jumping over urban obstacles, “when will I be old enough to have a boyfriend?”

Her mother, Liesl, raised her eyebrows in mock horror, and leaned across to tickle Klara on the couch.

“When you’re 35,” she said. And then, as Klara laughed, she raised the bar even higher: “No,” she said, “when you’re 40. Because you know you don’t have brains until you’re 40.”

It was an everyday conversation between a parent and her teen, light-hearted but woven with an undercurrent of the challenges of growing up.

Looking back, Liesl wonders why she didn’t pick up on the cue, the thread of something “big and complex” hidden in her daughter’s heart. She still doesn’t know why, just a week later, in August last year, Klara took her own life.

Was it because of unhappiness at home? Trouble at school? A fight with a friend? A crush on a boy?

“It hit me so hard,” says Liesl, a corporate communications strategist who has started a support and awareness foundation in her daughter’s name.

“We had been through teenage attitudes and fights, the normal ups and downs, like any family. I keep asking why, and where did I go wrong.”

The truth is, there is no easy way to understand what goes on in the mind of a teenager. This we know for sure, because we’ve all been teenagers.

But in a world where the familiar pressures of adolescence are only intensified by the dark side of the technological revolution – cyberbullying, social media shaming, Instagram and its ideals of perfect beauty – how can parents get to know their children better, and help them through these years of turbulent change?

This was the hot-button topic on the agenda for a recent BrightRock Iris Session, hosted by broadcaster David O’Sullivan, himself the father of two young boys.

Aside from Liesl, his guests for the session included educational psychologist Tshepiso Matentjie, and journalist and author Mandy Collins, who writes with wit, warmth, and insight about the joys and challenges of raising her two teenage daughters.

Mandy confesses that it’s impossible for a parent to say they know for sure where their children are and what they may be doing. But it is possible to lay down clear and consistent boundaries, and build a relationship based on trust and understanding.

For instance, on the boyfriend issue: yes, if you must, let your teenage daughter bring him home. “If I don’t allow it,” says Mandy, “she’s going to do it behind my back. I’d much rather have a gangly, revolting, acne-spotted teenager in my lounge, than wonder what she’s out doing with him. At least you can have a measure of control.”

At some point, you have to trust your own parenting, says Mandy, and hope that you’ve been enough of a model for your children.  “Because children learn far more from what you do, than from what you say.”

Tshepiso, who has served as resident psychologist on TV talkshows, and as consultant psychologist at the Oprah Winfrey Leadership Academy for Girls, says a mother is often the best judge of a looming emotional problem her child may quietly be confronting.

It’s not called gut-feel for nothing. “You carry this child in your belly for nine months for a reason,” she says. “Your body will tell you, your instincts will tell you.”

But it’s one thing to be able to act on your instincts; it’s another to be able to get through to a teenager. Any parent of a member of the species will know that there are two default teenage responses to a good parental talking-to.

The back-chat, followed by the door-slam, and the simmering sulk, followed by the door-slam.

“I would rather have a child who chats back,” says Tshepiso. “With the quiet ones, you might miss something. You need to look at changes in behaviour, loss of appetite, the signs of something going on. For a parent, it’s so hard to figure out the moment of crisis. Even adults struggle with the stress and pain.”

For Liesl, who hopes the Klara Göttert Foundation will play a role in bridging the communication gap, the signs were there, but they weren’t always easy to read. Klara would tell her mom how she wished she could run away from home, “but I used to tell my parents that too.”

“Parents drive their children nuts, children drive their parents nuts,” says Liesl. “You just don’t know what the breaking-point is. We sometimes underestimate the fact that young people’s emotional capacity only develops much later. Their emotions are on steroids. They get super-happy, and they get super-sad.”

One of the biggest states parents make, believes Mandy, is that they keep their own emotions from their children.

“We all have days when we could quite cheerfully stab someone with a pen,” she says. “If we don’t let our children see that we have a range of emotions, then when they’re suddenly hit with those emotions, how do they know what to do with them?”

But there is a simple secret to parenting, and it lies at the heart of all communication. Learn to listen, says Mandy. “We often don’t listen well or deeply enough. Instead, we lecture. Listen to what they’re saying, not to what you think they’re saying.”

As Tshepiso adds, children can be excellent manipulators, and any conversation you have with them may need to be on their terms. For all the guidance and advice you give, you may get very little in return.

But learn to listen, and listen to learn, and with enough time and enough love, you may come close to cracking the code that has baffled parents for generations. What do teenagers really think?

* Watch the the Iris Session below or on the Change Exchange, our breezy online portal for everything you need to know about the Big Change Moments in life: Tying the Knot, Starting a Family, Landing That Job, and Making a Home.

This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes.

 

 

How to Raise a Money-Savvy Child

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Of all the values you can teach your children, by lesson or example, the values of saving, budgeting, and investing may be the ones that pay the greatest dividends. By Maya Fisher-French

How to Raise a Money-Savvy Child

Whenever I meet people whose finances are in good order, they invariably tell me it was due to the lessons their parents taught them.

As young children they were warned against taking on debt and taught about the virtues of saving.

They worked for their pocket money and their parents taught them about budgeting and saving towards a goal, rather than just handing out cash on a whim.

So how can you, as a parent, go about creating a financially savvy kid?

I know from personal experience of having two very different children that everybody is born with a money personality.

For some children, saving comes naturally. They don’t really have anything they want to spend their money on and they like the idea of seeing their money grow. For other children, money burns a hole in their pocket and they are not happy until every last cent is spent.

But with the right encouragement, you can change their behaviour and attitude towards money. My first born is a natural saver. He is quite happy to hoard all his pocket money, splashing out occasionally on books.

My second born however, is a completely different child – money has no value at all unless it is turned into something tangible. This didn’t stop him from becoming absolutely distraught because his brother’s money box was so full while his was always empty.

As a parent, especially one who writes about money, I was really worried about what would happen to him once he grew up and discovered credit cards!

However through teaching him about money and the value of goods as well as getting him to set goals, he has saved over R1,000 in his bank account. It may take more encouragement for some children than for others, but if you put a plan in place, your child can learn some very valuable financial lessons.

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Turn pocket money into rainy-day money

Saving money in a piggy bank is a tangible way to teach children about money and the actual value of the coins and notes. There does, however, come a time when a bank account is more appropriate.

A money box never encouraged my son to save. Being able to see the money burnt a hole in his pocket and he was just desperate to spend whatever was in it.

When he was about 8 years old I opened a bank account for him and his behaviour shifted immediately. It was a matter of “out of sight, out of mind” and he started to want to grow the money.

By adding in birthday money and saving his pocket money, he was able to save towards things he really wanted rather than wasting the money on sweets and cheap plastic toys.

A bank account also teaches children about banking. You can even turn it into a family project – help your child to research the various bank accounts and to understand the most cost-efficient way to bank.

Invest in tomorrow

We took the bank account a step further by linking a savings account where we transfer any birthday money.

In order to spend it he first has to transfer the money to his transactional account so this further encourages saving.

For older children who may have longerterm goals, opening an investment account that is linked to the stock market can be an excellent way to teach them about long-term investing.

If for example your teenager has a holiday job or a weekly part-time job, encourage them to put R200 to R300 away each month into a unit trust.

Even if your 16-year-old saves just R200 a month into a unit trust and it grows at 12% a year, it could be worth as much at R17 000 by the time they turn 21.

Learn the value of working for money

It is important to give children money they can spend themselves so they understand the relative value of money.

Most families do this through pocket money which can be linked to chores in the home.

By relating money to a chore, they learn that money is worth something and doesn’t just grow on trees. It’s also a great way to get the dog walked and fed!

Be a wise and savvy shopper

Take your children grocery shopping with you and teach them how to calculate relative pricing – let them work out which brand of tinned tomatoes or packet of toilet paper is offering the best value.

My ten-year-old son has become extremely proficient at online shopping and finding stores that are offering sales. He has learnt to do price comparisons before spending and the idea of “shopping around” also means he doesn’t buy the first toy he sees – often by the time he has shopped around his interest in the toy has diminished.

Invest in tomorrow

Goal-setting is without doubt one the best ways to teach savings. It is very difficult to explain to a young child that they must “save for the future” but if they have a specific goal in mind, help them to research and work out how much it will cost, and then encourage them to save for it.

This was how I shifted my son’s mindset from spending to saving. Once he had a goal (an electric car set) he became obsessed about saving his pocket money and trying to find ways to earn more cash.

Learn to balance the budget

The teenage years are a wonderful time for children to learn how to work with a budget.

Sit with your teenager and calculate how much they need each month for their toiletries, clothing, airtime and entertainment, then give them a monthly stipend which they must use for their dayto-day spending.

In the first month they may blow it all on airtime but within a few months they will have learnt to make the money last – as long as you stand your ground and don’t give them extra cash!

Children learn best from example. You can’t teach your children to budget if you are not doing a household budget.

Discuss the household budget with your children and if appropriate, allow them to give ideas as to how to allocate that budget.

Holidays are a great opportunity to involve children in budgeting by providing a set amount that the family can spend over the holiday and then researching activities or ways they would like to spend it.

 

About Maya

Maya Fisher-French is an award-winning independent financial journalist. Her accessible and practical advice on personal finance and investment issues has appeared in several leading South African publications, including the Mail & Guardian, Maverick and BestLife. She currently edits the “My Money, My Lifestyle” section for City Press. Maya holds a BA Honours degree in Economics, and she worked in stockbroking and private banking before embarking on her journalistic career.

This article first appeared in The Comet, an online newsletter by BrightRock, provider of the first-ever life insurance that changes as your life changes.