Generational wealth – A possibility for all of us
In these difficult financial times, most of us are on survival mode, barely finding the time to think about long term issues. We find ourselves wanting to alleviate financial burdens for our offspring, yet we find ourselves still taking care of our parents and even grandparents. This blending of generational dependency can end with you ensuring that your children are not responsible for your financial needs.
Black Tax is a term used to describe the financial obligation of people who have achieved some financial success to support their extended families and communities. The term "Sandwich Generation" is used to describe the people who are in this situation, as they are "sandwiched" between supporting both the generation above and below them.
We don’t need millions to ensure the financial success of the next generation, below are actions you can take to end the cycle of dependency.
Millionaire Babies
Most of us wish our parents could have created this for us, but why don’t we make this a reality for our kids?
R1 200 invested monthly for 18 years (from birth until the end of high school) in an investment instrument giving your returns of 10% with an annual escalation of 6% will ensure you have over R 1 million at the end of high school.
Where to get R1200? So you don't have any spare money to invest? R 1 200 is easily our monthly spend on pay tv, takeaway coffee and memberships you no longer use/need. If we downgraded to a cheaper option, eliminated excess and LOOK at our spending, this is the type of financial freedom we can create, and yes, in this lifetime.
Investing wisely can change your life and the life of your loved once, let M.A.L.I assist you with calculating your returns on investing.
Retirement Planning
Black Tax or Sandwich Generation, we now have the power to break this cycle. Let us not create the same burden for our kids that we are finding ourselves in. The least we can do is not to be a burden on our kids:
- When is the last time you printed your pension/ provident fund statement to check how much you have? Preparing for Retirement means you will not have to burden your children financially when you are no longer earning an income.
- Do you know how much you will need in retirement? Learn more by visiting our Retirement Planning Page
- Medical cost and frail care costs, what provision have you made for these?
M.A.L.I can assist you with calculating your Retirement needs.
Where to get money to invest monthly? A small change in your spending can have a BIG financial impact. Consider these examples of unnecessary spending:
- What do you spend on Saturdays for takeaways? Skip one Saturday and use that money for this purpose.
- Takeaway coffee or lunch bought at work. Quick snacking at the garage because you don't plan your meals.
- Don’t be a party pooper but consider how much you spend on a night out and cut back on buying those rounds!
- Streaming services – cut back on excess platforms that you don’t use
You can increase your provident fund contribution at work which will save you fees charged on external retirement annuities and also get the tax benefits.
Live Cover & Group Life
When you die your debt doesn’t die with you, in as much as your kids will not inherit your debt it also means they will not inherit anything if the people that you owe are not paid.
Ensure that there will be enough money to pay-off all your debts and pay for your kids’ education fees. There are certain taxes and fees that will be payable by your estate, ensure that these are also taken into account when calculating how much your estate and beneficiaries will need. Visit our Estate Planning page, Group Life Cover page and our Life Cover vs Funeral Cover page to put your loved ones in the best possible position.
Not all of us need a R 1 million life cover, do your own calculations, get a financial advisor to help you do the calculation if need to. Let M.A.L.I help you calculate
Where to get money to pay for the life cover? Are you spending too much money on funeral covers vs. life covers? You might need to cancel some funeral policies and get a life cover.
Building wealth for the next generation is possible when we use introspection and realise that there are areas like spending on pay tv or having multiple funeral policies where we are leaking cash, this is where it all starts.
At worst let this be the last generation that struggles with issues of black tax or sandwich generation issues. In this lifetime financial freedom is possible.
Chat to M.A.L.Iabout investment options that will enable you to break any legacy poverty. Go bigger and find out about Millionaire Babies!
How 'black tax' cripples our youth's aspirations
How 'black tax' cripples our youth's aspirations
There is a certain anxiety that comes with knowing that your aunt, who raised you for a good part of your adolescent life, might not have money to buy a loaf of bread. Or when you are inundated with “Please call me, need cash pls” SMSes from your close cousin, who used to provide reasons for needing the cash – R35 for 15 minutes at the internet café to submit a job application, perhaps – but no longer bothers with the details.
Read the Mail & Guardian article HERE
Breaking the cycle of the sandwich generation
Like many South Africans, Otis is part of the “sandwich generation,” a group highlighted in the Old Mutual Savings and Investment Monitor (OMSIM) 2024 findings.
The report reveals that 41% of working South Africans are caught between supporting both parents and children, a figure only slightly lower than the 43% reported in 2023.
Read the BusinessTech article HERE