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I have a chance to look at people’s budgets on a daily basis. I continue to see how we neglect saving for retirement. Many of us live as if we will be Forever Young.
Entrepreneurs are the worst when it comes to saving for retirement. They do not have any pension and they do not save any money for old age. Many live in the hope that their businesses will one day generate millions in revenue and they will never need to save for retirement. Most entrepreneurs also use their pension to start their businesses. Those who are employed are no better as they continue to cash their pension when they change jobs. Many will have to depend on their children in old age. Some will have to continue to work and others will have to rely on the government pension. I continue to urge all of us to invest for old age. Surely it is better to tone down your life style now than to be old, grey and financially struggling. Why spend R6000 in car repayments and only R250 in retirement savings? The sooner you start saving for retirement the better as you benefit from compound interest. Saving money for your old age is the best gift you can give your children as they would not have to worry about your financial wellbeing when you are old.
The most common mistake that many people make is to believe they are too young to start saving for retirement. The best time to start is as soon as you start working. You need to save at least 10% of your income from your first salary cheque to ensure that you don’t fall into the trap of poverty in old age.
You can also give your children the gift of financial independence in their old age. Did you know that you can start saving for your kids’ pension as soon as they are 1 year old? You can put away R250 for them in a retirement annuity. When they start working, they can get the tax deductions and also take over the payments of their retirement annuities. If you do this, you would be assured that your children will be financially independent in their old age. For those who can afford to put away R250 monthly, getting a retirement annuity would be the best gift you could give to your children. If you have a child that is physically or mentally impaired and has a little chance of getting a good job, you could also invest in a retirement annuity for them so that you can be assured of their financial security into their old age. They can start drawing a monthly income from the retirement annuity from the age of 55.
To find out about the power of compound interest, read pages 106 to 109 of the book From Debt to Riches – Steps to Financial Success. If you are ready to save for your pension for yourself or for your children, drop me an email on email@example.com