Despite the fact that mid-December is traditionally associated with recuperation and leisure, it may also be a time of financial hardship for some South African families, according to Lynn Bolin, head of communications at M&G Investments.
According to M&G Investments, the holiday season comes with its own set of costs, such as buying gifts for family members and thank-you gifts for teachers and other caregivers.
“While your child is likely to have many suggestions on how to spend your hard-earned cash this summer holiday, it’s important that you stand your ground and do not allow yourself to be guilted into overspending.”
M&G Investments recommends the following strategies to minimise overspending and lessen your financial strain during the school holidays:
Concentrate on worthwhile tasks
Planning activities that are more beneficial in terms of memory or emotional worth than the cost of the excursion is an excellent way to stay to a budget.
“For example, this could be visiting friends and family at their homes or having a picnic out in nature instead of going to a fancy restaurant,” said M&G Investments.
According to the organisation, supporting local entrepreneurs and small companies at Christmas markets may be more cost-effective – and fun – than completing your holiday shopping at major chain retailers, with the added bonus of directly benefiting your community.
Choose carefully
Not every activity you perform over the holiday season needs to be financially rewarding. For those with children, you might attempt to set aside a daily or weekly activity or gift budget at the start of the holiday season, then collaborate to create a schedule that spreads out your paid activities over an agreed-upon duration.
“Fill in the gaps with free, fun pursuits like camping in the backyard or going to the beach or the forest for a family day,” said M&G Investments.
Investing in gifts
One step beyond developing a holiday budget and schedule is to utilise the Christmas season to introduce the concept of investing. For example, as a present, you may choose to establish a unit trust on behalf of your child to fund a large future vacation, such as a trip to the Kruger National Park, which typically needs scheduling at least one year in advance.
This allows you to begin teaching children investment principles such as compound interest, risks against reward, and investing for the long term (particularly because it may take some time before they see any substantial payoffs owing to the modest sums they will most likely be putting in).
Keep your child informed so that they can observe the market’s ups and downs and understand that this is normal. Simultaneously, they may enjoy the anticipation of an unique activity or reward while saving money and learning the art of patience, which is one of the keys to successful investment.
Another option to explore is establishing a Tax-Free unit trust in your child’s name as a tax-efficient strategy to save for the long run. If you don’t already have one, you’re not taking full benefit of the measures put in place by the South African government to make investing more profitable for everyone.
Compounding tax-free earnings over time can have a considerable influence on your investment values when compared to a “standard” unit trust.
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