It is often reported that South Africans are bad savers, so what better time to teach your teenage children about saving, than in Youth Month. Few teenagers would be thinking about retirement, but retirement planning is a lifelong commitment and something that parents should speak to their children about – especially before they start their first job.
As a parent you want to help your children learn good money habits from a young age, so that when they are ready to retire, they can do so comfortably. bsmart has looked at advice from financial experts, and these are five key points you should consider speaking to your teenagers about.
1. Start early
Landing your first job is definitely a cause for celebration, but it should be in moderation. It’s key to start good savings habits from as early as possible, including your first pay cheque. CNN Money explains that the “sooner you begin saving, the more time your money has to grow”, and this is where you will benefit from the power of compound interest.
2. Know how much to save
For professional advice and recommendations, speak to a financial advisor. Not only will they help you choose the correct retirement savings product, but they can help you establish how much you should be saving every month. Business Live suggests that you occasionally redo this calculation, as your life goes through different stages, such as buying a house or getting married.
3. Take control
Many people believe that if their company is contributing to their retirement fund, then their retirement savings are being adequately taken care of. Unfortunately this contribution is often not enough for you to comfortably retire, which is why Moneyweb’s advice is to “supplement this with additional contributions”.
4. Changing jobs
In the past a person could spend their entire adult life working for one or possibly two different companies, but today it’s not uncommon for people to change jobs every few years. While this in itself isn’t a problem, it’s essential that you don’t withdraw money from your retirement savings, when you are between jobs. The 2017 Old Mutual Corporate Retirement Monitor reports an increase from 19% to 35%, in the number of working South Africans who would likely “cash-in their retirement savings should they have the opportunity”.
5. The advantage of time
A worrying estimate from our National Treasury is that only 6% of South Africans will have enough money saved to retire comfortably, without their standard of living changing. What makes the biggest difference to your retirement savings is when you start, rather than how much you save. When you put money away from your first pay cheque, you give yourself more than 40 years for it to grow.
Teenagers often have the mentality that they are “still young and can save later”, but by teaching them good money saving habits before they start their first job, you will set them up for an easier, happier and more secure retirement.
At bsmart, we encourage our members to teach their children about saving, through the annual bsmart cashback bonus, which can be saved and paid our annually in November. To learn more contact us or click here to sign up directly through our website.
Disclaimer: bsmart does not provide financial advice. The above article is for information purposes only, to share current economic and financial topics and trends. Please consult a suitable and qualified financial services provider if you require financial advice.