Delayed parenting: avoid a financial bottleneck
There may be good reasons to postpone starting a family, but it’s also important to consider the potential financial implications when you make this call, says Karin Muller, head of Growth Market Solutions at Sanlam.
People are delaying having children for various reasons, among them societal expectations, deferred marriage or long-term partnerships, the desire for more financial security and greater emotional maturity, career goals and the wish to pursue other interests such as travelling. While this certainly has advantages, delaying parenting could lead to a financial bottleneck later in life unless you have drawn up a well-balanced financial plan taking into account both your present and potential future circumstances. For some people, it could be financially beneficial if you used your time before starting a family to build a good financial foundation.
Facts to consider
Managing your financial priorities may be challenging.
You will need to create a balance between competing financial demands. If you have children in your 40s, your children’s requirements for tertiary education may come at a time when you are thinking of retiring, for example. Which do you save for first? “Retirement savings should be your first priority, but saving for your child’s education should also happen according to a plan. Working with an adviser can help you balance these priorities,” says Muller.
You could become part of the ‘sandwich’ generation.
A ‘Life Surprises’ survey conducted by Sanlam in 2014 revealed that more than 40% of South Africans over 50 are unexpectedly supporting a family member – with children and grandchildren being the largest supported groups, followed by extended family members and parents. Some end up supporting both elderly parents and children. To avoid this seriously impacting your financial and emotional health, you will need to factor this future possibility into your financial and life planning.
Your family may face hardship if you should die unexpectedly.
As you get older, health issues are more likely to surface. It is therefore crucial that you should plan for your family’s future in the event that something might happen to you – income protection, life insurance, and critical illness and disability cover are especially important. Drawing up a Will is also crucial, which should include the appointment of guardians who will look after your children in the event of your death. Remember that your parents and even your siblings may be at an age where they won’t be able to take over this role.
Your retirement savings need to be preserved, at all times.
Women, in particular, sometimes take a few years off work to raise a family, and may be very tempted to cash in their retirement savings to cover extra costs. Muller warns against this, saying that retirement savings should, in such instances, rather be transferred to a preservation fund. Your retirement investments need time in the market for compounding to work its magic. You will never be able to catch up the backlog should you decide to re-enter the job market later, especially if you are in your 40s or 50s.
“If you postpone parenthood for whatever reason, the most important factor to bear in mind is that your planning timelines will be different to those of people who have children at a younger age. It is essential to consult a professional financial adviser to assist you in drawing up a personalised financial plan, taking your specific needs and circumstances into account,” concludes Muller.
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