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By Readers' letters Time of article published Jun 29, 2020

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I want to start saving an emergency fund. What should I be thinking about?

Name withheld

Nirdev Desai, the head of sales at PSG Wealth, responds: Start by setting a ballpark. Although it can be difficult to determine what you’ll need, or may seem impossible to reach your targeted amount, knowing where you are going is an essential first step.

The rule of thumb for an emergency fund is to save three to six months’ living expenses. For some of us, this will be less than it will be for others, and you can assess your essential spending to determine what an average month’s expenses look like. You may realise that prioritising savings now to secure your future financial security may require some adjustment. The lockdown has removed many socialising and entertainment expenses, so use this to your advantage, balancing these savings with the potential requirements to help any additional dependents because of job losses in the economy.

Bite-sized chunks (or small contributions) towards saving for your emergency fund are easier to manage than a huge amount in one go.

You will need to ensure you can easily access the money when needed, and that you can be sure of the value you are able to access in times of need. For this reason, more liquid savings vehicles are better suited.

However, cash type-investments are not suitable for the long term (where you want your capital to grow). Getting the balance right is important - over-allocating to your short-term savings pot can impact your ability to grow your wealth in the long term.

An adviser will be able to assess the best place for your savings, based on your unique circumstances and can help you to see the bigger picture for your financial plan.


I’ve saved up R3 000 and can manage to add R500 a month into an investment for my son. He turns 10 soon, and I want to save up funds for his 21st birthday. What is my best option to grow this investment?

Name withheld

Pierre de Bruyn, a financial adviser from PSG Wealth Northcliff, responds: The time horizon for your son’s investment being 11 years allows you to take on higher risk in order to gain better returns. I would therefore split the investment between a local equity unit trust and an offshore feeder equity fund. This will allow you to have exposure that is in growth assets and also takes the rand/dollar exchange rate into account over the longer term.

You will experience higher volatility than in lower-risk funds but should expect better real returns over the period.

You do not mention your tax position, but I assume that you pay tax, so it would be beneficial to the investment return and your tax position if the investment is housed in a tax-free savings account (TFSA). This will mean the investment will grow over time, free of the effects of taxation on income and capital gains.

You could approach a provider that offers TFSAs with access to equity unit trust funds and start the investment with R3000 upfront, adding R500 a month. To ensure your decision is optimal for your circumstances and considers your financial position holistically, I suggest you consult a qualified financial adviser.


I have seen my in-laws struggle financially, and I want to ensure I don’t put my children in the same predicament one day. How do I prioritise saving for retirement when my partner and I also need to do our bit for the family?

Name withheld

Magdeleen Cornelissen, a financial adviser from PSG Wealth Menlyn, responds: Unfortunately, there is no quick fix when it comes to retirement planning. A financial plan will help to unlock your financial success by providing a roadmap to reaching retirement successfully.

Financial stability is the result of disciplined financial habits that include regular saving towards a retirement investment. The first person you should pay every month is yourself. Make your retirement savings the top priority and handle them with care.

The most important aspect of a financial plan is having a required outcome (goal). This will enable you to review your savings that you have built up over the years. The moment you know that you are not on course to meet these objectives, you can adjust your behaviour in time, and make informed decisions about your future. The added benefit of this method of saving is that if you apply the plan correctly, you can enjoy tax benefits as well.

Your financial plan will include setting up a budget, creating an emergency fund, understanding your tolerance for investment risk and making your personal risk cover a priority.

It is not only older people who can add to the financial stress of their children. The tables can easily turn if you experience a medical event and can no longer work and earn an income. This is why you must protect your ability to save towards retirement. An accredited financial adviser is best placed to assist you.


How can I get my children (10 and 15 years old) to realise that pocket money should come with some responsibility?

Name withheld

Ronald King, the head of public policy and regulatory affairs at PSG, responds: Explore teaching them “adult” money lessons in practical, memorable ways. You can mimic the discipline of saving by paying pocket money on a specific date each month. This demonstrates that money isn’t available on tap.

You could provide “statements” for various items each of them spends pocket money on, which may reduce financial intimidation and gives insight into budgeting. They will learn to plan for what they need and want.

Teach your children the difference between a credit and debit card and try giving them some responsibility for making select purchases, within strict guidelines (an example is using a reputable website to order stationery).

You could pay “performance bonuses” for spotting opportunities that save money in the home or for schooling, such as finding a cheaper price for school supplies. Any money saved in the budget could be invested instead. A formal way to save can make your children cognisant of the cause and aware that their efforts are making a difference. Acts like these can add up to useful life lessons and appreciation for the value of money.


I am working from home indefinitely. Could I cancel my car insurance to save on my monthly expenses?

Name withheld

Bertus Visser, the chief executive of distribution at PSG Insure, responds: If you cancel your insurance, you won’t have a financial safety net if you decide to use your vehicle and have an accident, or your car is stolen. Keep in mind that even a quick trip to the shop puts you at risk without insurance.

Not having cover in place if your vehicle is written off could make for an expensive, debt-ridden future without cover.

I suggest you chat to your adviser for any cover reductions, but note that paying consistently for insurance can pay off if you need to claim.


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