“Taking financial responsibility for a family in 2017 means that you’re tackling many challenges,” says John Manyike, Head of Financial Education at Old Mutual.
South Africa’s economy is struggling to grow, unemployment is high and downgrades by credit ratings agencies lower the chance of interest rate cuts, thereby stretching the family budget.
In many families dads take care of big ticket items such as mortgage bonds, children’s school fees and insurance policies, among others. It’s not easy keeping ahead of the family finances, but Manyike says it can be done.
He has three money management tips for Dads this Fathers’ Day:
- Write down an inspiring Vision for the family and make sure this vision is backed by clearly defined financial goals. If you need assistance, speak to your financial adviser. Be sure to get everyone’s input and buy-in as it might be harder to achieve it if the family is not inspired to do so. Put images of your vision on your fridge, cellphone and keep talking about it as a family to keep it alive. For example, you can take a photo of your 5 year old child wearing a graduation gown and paste it on the fridge to symbolise your vision of your child going to university or college.
- Draw up a family budget and discuss the monthly budget as a family. This will make it easier to live within your means and deal with unplanned expenses or wants. Your budget is your plan for your money. When you’ve got a budget that you follow, you have better control of your finances and fewer money worries. Sticking to the budget requires teamwork, continuously reminding yourself about the vision, ongoing encouragement from each other and tracking your family savings milestones from time to time. Reward your family at least every 6 months for reaching the milestones, to motivate them to remain committed to the bigger plan. This will help even if you are not around. “Drawing up a budget and sticking to it gives your child an excellent example of how they can take control of their finances,” Manyike comments.
- Get your debt under control and only borrow if your loan is part of your wealth creation strategy. Charge down your debt by paying debt faster. Debt is not necessarily a bad thing. It is just unfortunate that a lot of people don’t know how to use credit to their advantage.
The first step in getting debt under control is knowing how much it is and what it is costing you. List the amount of the debt and the interest rate charged. Then pick one debt and set aside an extra amount each month to pay this off.
“Pay off the most expensive debt first,” is Manyike’s tip. This is the debt that is costing you the most. For example, if you have a bond at a 10% interest rate and a loan at a 20% interest rate, pay off the loan first.
Dads score quite well in this area. Research from Old Mutual’s 2016 Savings and Investment Monitor found that 91% of Dads used formal savings products and policies. 57% of Dads had pension or provident fund savings.
“Make sure you speak to your financial adviser at least twice a year or when there are financial changes in your life,” advises Manyike.
EDUCATE YOUR CHILDREN
Educate and encourage your children to manage their money wisely. 63% of the Z-generation (18 – 23 year olds) surveyed in the 2015 Old Mutual Savings and Investment Monitor said their parents taught them the most about money and how to manage their finances.
Manyike’s final tip for Fathers is to lead by example and bear in mind that a wise man leaves an inheritance for his children’s children.