As a mother, how can I effectively plan to leave my children and grandchildren with the knowledge and confidence to build on their inheritance? Carina van Rooyen, wealth manager, PSG
Transferring generational wealth without a plan in place can be a complex and emotionally-charged process for many families. That’s why it’s crucial to establish a well-structured plan that provides clear guidance to beneficiaries. A comprehensive financial plan not only supports this process, but also equips younger generations to responsibly build upon their inheritance.
By doing so, you help ensure that the next generation of women is even more financially secure than the current one.
Estate planning is the foundation of successful intergenerational wealth transfer. This involves creating a living will to outline medical treatment preferences in critical situations, setting up a trust if appropriate and designating a trusted individual to hold power of attorney in case of incapacitation. Having a well-crafted estate and financial plan ensures your accumulated wealth is distributed according to your wishes, manages expectations, minimises family disputes and offers tax benefits.
Designating beneficiaries for your assets is a vital component of estate planning and ensures that your assets are transferred smoothly and efficiently to your loved ones according to your intentions. It’s important to regularly review and update these designations, particularly after major life events such as marriage, divorce or the birth of a child.
By understanding the requirements of estate planning, properly designating beneficiaries, managing financial obligations and equipping the younger generations with financial literacy and investment strategies, female investors can look forward to a prosperous future and smooth transfer of wealth that has been built over a lifetime.
As a 34-year-old and recently engaged, how can I best prepare myself financially for the future, especially as my fiancé and I transition from managing our individual finances to managing our household finances together? Magdeleen Cornelissen, wealth manager, PSG
Firstly, congratulations on your engagement! Since you are not yet married, it would be best to discuss the most appropriate marital financial regime for you and your soon-to-be husband. Choosing the best marriage regime for yourself is just as important (if not more so) as choosing the perfect wedding dress and can lead to a better outcome in the event of divorce.
Men and women do not necessarily have the same needs and objectives when it comes to managing their finances. Women often take leading roles in managing other household affairs at the expense of their financial position. Try to actively engage in your household finances, even if you feel that it is not your “speciality”.
Be realistic about your savings goals, but remember that every cent can make a difference when saving for retirement. Ensure you have a trusted financial adviser that you can share your dreams and concerns with. Ask uncomfortable questions about your partner’s financial position and be prepared to share your stance on finances if asked by your fiancé. This is especially important at the outset, while you can still change the outcome of your joint financial position.
If you are planning on having children, understand that the foundation of financial education begins at home. Ensure that you pass on your financial knowledge to your children, so that they learn the power of financial independence from a young age. Not only will this give them the ability to play a leading role in their own financial journey, but it will also entice them to think critically about the steps they take to create their own wealth.
I’m a 35-year-old single mother planning to buy a new house and have two children in primary school. What is the best financial strategy to ensure that my bond is paid off by the time I retire while also saving for my children’s tertiary education? Suzette von Broembsen, wealth adviser at PSG Wealth, Rosebank
This is a daunting task, and good financial planning from the start is critical to take care of yourself and your children. I would recommend you consider the following:
1. Choose the right bond repayment term: If you plan to retire at 65, choose a bond term that aligns with that time frame. Prior to buying a house you will need to ensure the monthly payments fit your budget. Be conservative!
2. Accelerate repayments: Whenever possible, use extra funds such as bonuses or tax refunds to make additional payments on your bond. This will reduce the interest you owe and help you own your property sooner. By paying off your bond faster, you can avoid extra interest payments to the bank and start saving earlier in a liquid investment.
3. Build an emergency fund: Maintain a fund covering 3-6 months of expenses to avoid using savings for emergencies. This will come in handy should any emergencies arise. Be sure to slowly top it up as often as possible.
4. Education savings: Start a dedicated fund for your children’s education. The power of compounding is your friend in this scenario. Allocate your capital based on how long you plan to invest before needing to withdraw it. Consider a mix of equity and fixed-income funds for your investments.
5. Maximise tax benefits: Use tax-efficient investments such as retirement annuities (RA) to save for both retirement and education, reducing taxable income.
6. Review regularly: It is always worthwhile to work with a qualified financial adviser who has your family’s best interest at heart. Annually review your financial situation to adjust for changes any changes or redirection where needed.
As a single mother, maintaining balance is crucial. This approach will help you pay off your bond by retirement and secure your children’s educational future.
I am contributing towards a provident fund as part of my employee benefits. Can you help me understand my retirement planning options to ensure that I retire comfortably? Richus Nel, financial adviser at PSG Wealth, Old Oak
Retirement is a discretionary decision attainable when your passive income can provide for your living expenses in a sustainable manner. Resigning, retiring or redundancy before this point will require you to seek income from elsewhere, or cut back on living standards.
Property, a business (whole/proportional), investment solutions (eg provident funds) and even royalties can all provide passive income. Before March 1, 2021, provident funds enjoyed unique privileges at the point of retirement – 100% of the fund value was allowed to be withdrawn as a cash lump sum (taxed according to the retirement tax table). Now, members are limited to one third of their fund value after March 1, 2021, as a lump sum withdrawal. New retirement fund legislation (the “Two-Pot” system) is further changing the retirement landscape on September 1, 2024, the implications of which should be further discussed with your certified financial planner.
Employee benefits generally have two components consisting of risk cover and retirement fund benefits.
It is important to determine whether you have “approved” or “unapproved” group risk benefits. Approved risk benefits are part of the retirement fund and will be funded and taxed accordingly. This might sound insignificant, but approved benefits translate into:
Tax deductible premiums [max 27.5% of earnings/taxable income (capped at R350K per annum)] will fund both risk cover and retirement capital.
Both retirement lump sum withdrawals at retirement and a life cover payout, are cumulatively taxed according to the retirement lump sum table (which might result in huge shortfalls).
Ideally, I would therefore suggest that group employee benefits members contribute over 40 years:
15%-17.50% of gross earnings towards an “unapproved” retirement fund scheme (excluding any risk benefits)
17.50%-20% of gross earnings towards an “approved” group retirement to compensate for risk premiums.
Depending on factors such as investment returns and fees, the best approach to conventional retirement is for an individual to invest 15%-20% of their gross earnings into a well-managed retirement fund solution for 40 years. Exposure to growth assets should be set at 60% or more. This will allow for financial freedom for +-30 years, with some margin of error.
Hi there! My business’ operations involve the storage and handling of chemicals. I am aware that this comes with a variety of risks. Please could you advise on what I need to be aware of from a safety and compliance perspective, which can affect my insurance? Karen Rimmer, head: distribution at PSG Insure
Insurers often have specific requirements related to the storage and handling of chemicals, and failing to meet these requirements can result in claim repudiation. To avoid this, you must remain compliant with legislation. Insurers consider applicable laws when assessing claims, making it crucial for you to understand and adhere to the regulations that govern your operations. Full disclosure of all relevant business information, including the chemicals used on-site, is essential. From a licensing perspective, you must ensure that all necessary licenses, permits and compliance documentation stay up to date and readily available to enable a smooth claims process should the need to claim arise.
How you store these chemicals is also of paramount importance. The building where chemicals are stored must be equipped to handle such materials. Factors such as occupancy classification, building construction, ventilation and fire protection systems play a crucial role in determining the suitability of the premises for storing chemicals. You also need to have contingency in place to address chemical spills and emergencies effectively. Employing certified and competent forklift drivers, access to spill response experts and providing appropriate safety equipment and emergency facilities for staff are vital components of proactive risk management. Implementing safety measures such as fire walls, separate storage areas and proper ventilation systems further enhances the overall safety of chemical handling operations.
I suggest that you also speak to an adviser to get a detailed understanding of your specific risk exposure and ensure that you remain covered.
PERSONAL FINANCE