Practical financial planning tips for parents

Eight essential financial planning tips to ensure a stable and prosperous future for your children while maintaining financial stability today. Picture: Carolin Voelker

Eight essential financial planning tips to ensure a stable and prosperous future for your children while maintaining financial stability today. Picture: Carolin Voelker

Published Jul 3, 2024


As parents and financial providers, the responsibility to shape both your and your children’s financial futures can be daunting. Balancing immediate needs with long-term goals requires careful planning and strategic action.

Here are eight practical tips from Old Mutual to help you secure a prosperous tomorrow for your young ones while maintaining financial stability today.

● Prioritise Educational Savings

Investing in your children’s education is one of the most impactful steps you can take. With educational inflation in South Africa currently around 7%, starting an education savings plan as early as possible is crucial. There are several free online tools and calculators to help parents get started.

● Plan for Retirement

Reviewing and implementing your retirement plan is essential. Regular contributions to a retirement solution, such as a retirement annuity, can accumulate significantly over time and offer substantial tax benefits.

● Build an Emergency Fund

An emergency fund provides a financial safety net during unexpected events like retrenchment or urgent home repairs. Aim to save at least three to six months' worth of living expenses. This fund should be easily accessible and kept separate from regular savings to ensure your family can weather financial storms without significant disruption.

● Be Realistic About Risk

Part of being a parent is planning for life’s eventualities, including health issues or mortality. Ensuring your family can maintain their standard of living in the event of your disability, severe illness, or death is essential. Planning for unexpected risks secures your child’s financial future.

● Create a Comprehensive Family Budget

Managing a family budget requires careful planning and discipline. Track household income and expenses to identify areas for savings. Allocate funds for essential needs such as education, housing, food, transport, and utilities while setting aside money for savings and investments. Old Mutual’s 22Seven app is a free and useful budgeting tool.

● Educate Your Children About Finance

Financial literacy is a valuable skill to pass on to your children. Teach them the basics of money management, including saving, budgeting, and investing. Encouraging good financial habits early on will help them make informed decisions and achieve financial independence.

● Invest for Long-Term Growth

Investing is key to building wealth over time. Starting early allows investments to grow through compound interest. Choose an investment or savings product that suits your goals and risk appetite. Consider starting with low-risk options like a Tax-Free Savings Account and gradually diversify your portfolio.

● Seek Professional Advice

Financial planning can quickly become overwhelming due to the numerous factors involved. Seeking guidance from expert financial advisers can provide personalised strategies tailored to your goals and circumstances. They will assess your income, responsibilities, and goals to help you develop a comprehensive financial plan.

By taking proactive steps towards financial planning, you can secure a positive future for your family. Your financial habits and decisions today will significantly impact your family’s economic stability and prosperity, ensuring that you and your children can thrive.