Mmegi Online :: Financial Wellness
Banners
Banners
Banners
Banners
Last Updated
Thursday 13 December 2018, 12:33 pm.
Banners
Financial Wellness

Saving And Planning
By Staff Writer Thu 13 Dec 2018, 21:40 pm (GMT +2)
Mmegi Online :: Financial Wellness








Violet's son, Archie, wants to go to university next year: "He's got great grades and wants to study in Australia, like his older brother." "His brother got a Government grant to go to university in Perth five years ago.He trained to be a doctor.  He's nearly finished his degree with honours and has loved his time at university.  We are so proud of his achievement - if only I could afford to give Archie the same opportunity." Unfortunately grants for international universities are harder to get nowadays. How can Violet say: "I'm sorry Archie, I can't afford to send you to study in Australia, I always just assumed the Government would pay, so I never saved for you."   This story is becoming more common. Times have changed and sadly we no longer rely on Government to send our children overseas for their tertiary education.  There are more important requirements in the national budget.

Planning for the expectedevents in our lives
There are many events that will happen in our lives that we can plan for financially.  For example, we know it is our duty as parents to educate our children as best we can.  We can plan and save money from the time that our children are born, in order to have enough money to offer them the best education that we can afford. Many of those who don't plan and save spend all their money on a high cost primary school, then a lower cost secondary school, and have no money for university. When their child hits the job market, the employers don't care about the primary school, just the quality of the degree.

Strike the balance
As with all aspects of your personal finances, it comes down to striking the balance between what you spend today, and what you save for tomorrow. There are two types of education savings: short term and long term. Short Term Savings - Fees Account Short Term Savings are what we have to do to pay current school fees; we budget and save monthly so that we can afford the termly school fees that we know are coming every three to four months. This should be done in a savings account or money market fund.

Long term savings - Education fund
Long term savings is where we dedicate a certain amount of our salaries every month, which we invest into a safe and secure savings plan, where our money can grow over a long period of time until we need to draw from it to pay for our children's university education. In the US, every ambitious parent has a 'college fund' to make sure their kids get the best start in life. Your kids need one too. Provided you have the short-term fund in place, a college fund should be invested in diversified, balanced, long-term portfolio.

Other areas that need planning.
Can you think of other areas where we can plan ahead by saving for future events we know are going to happen?
Buying a house Buying a house to

Banners

live in is one of the best investments that we can make. Because we save money by not paying rent, we can borrow money as a mortgage and put the rent payment towards paying off the interest. However, when we apply for a Mortgage Loan to buy a house, we need to put down a deposit.The lender won't lend us the whole value of the house, because if we stop repaying the loan, they have to sell the house to get their money back. So how do we get the deposit? We can't borrow it - the Lender wants to see that we have saved for the deposit; to prove we are capable of keeping up with the repayments.  So, when we plan to buy a house, we must first save a short term or medium term savings fund to pay for the deposit on the house.

Retirement planning
What happens when we are no longer able to work? When we were children, before we started working, our parents looked after all our needs for food, clothing, education and entertainment.   When we worked, we looked after and paid for all of our needs.  Once we are too old to work, or can't work for whatever reason, who is going to pay for us then?

When you are old, do you want to be?
* In debt?
* Dependent on your children?
* Dependent on your extended family?
* Surviving on a small state pension? or:
* Financially independent?

If you think the last option is important, you need to save money for long term retirement planning. Retirement planning takes motivation and dedication.  You must ask yourself, how important is it to afford to live as you usually do, in your retirement?  Is it important enough to take some of your spending now, and pay it into a savings plan for your older self to spend in retirement? 

How much should I be saving?
The rule of thumb on how much is necessary to be saving is to take your age and divide it by two. That is the percentage of your salary that you should be saving every month. So a 20-year-old can save 10 percent, a 30-year-old 15 percent and a 40-year old must save 20 percent. If you save less than this amount, you will have far less money when you are old than you have now when you are young. That means that your standard of living will drop, and you won't have money to enjoy yourself. In this article, we've covered education savings, house deposit savings and retirement savings.  First pick the one that means the most to you, and then speak to a financial adviser who is a member of ABFA - the Association of Botswana Financial Advisers, and get independent financial planning advice.

*Author: Lechedzani Pitso is a Financial Wellness Trainer with S.C.I. Training (Pty) Ltd.  S.C.I. Training run financial wellness programmes in Botswana. For help and information contact them on 3180243 or training@scifinancial.com or  financialwellness@mmegi.bw

Subscribe to our Newsletter
Banners
Banners
Banners


Banners
Banners
Subscribe to our Newsletter
have a story? Send us a Tip
Banners
  • Previous
    Next
    Masa Centre
    ::: Thursday 13 Dec - Thursday 13 Dec :::
  • Previous
    Next
    Riverwalk
    ::: Thursday 13 Dec - Thursday 13 Dec :::
  • Previous
    Next
    Gamecity
    ::: Thursday 13 Dec - Thursday 13 Dec :::
Selefu
Masisi, Khama
Banners
Banners
resim yükle