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As parents, we normally give our children Christmas gifts but many of them are used up and forgotten by January of the following year. There is one gift that I believe that as parents we need to give to our children and that is the gift of financial independence into their old age. Statistics inform us that only 6% of South Africans retire financially independent. The rest of us have to continue to work until we are very old and we cannot work any longer, or we are going to depend on our children in old age, or we have to go on the SASSA queue to survive. So how can we practically help our children and ensure that they retire financially independent? Apart from talking and educating our children about money, one of the best gifts we can give them is to sign up a retirement annuity for them as soon as they have a birth certificate. For as little as R300 per month, we can give our children a gift of financial independence. When they start working, they can take over the monthly contributions. They can only start withdrawing from the RA when they are 55 years old. What is the benefit of taking an RA for young children?

• Time in the market is essential for growth. If you take an RA for your child while they are young, their financial independence is guaranteed because that R300 monthly premium is bound to grow into millions of Rands by the time they are 55 years old
• Growth in a retirement annuity is tax free. You pay tax when you withdraw the money
• When they start working and they have a tax number, they can claim deductions for all the contributions that you made for them over the years
• In a nutshell, by taking a retirement annuity for your young children, you are giving them a financial head start. They will get the benefit of compound growth for the many years that their money is invested. They cannot override you by cashing the funds when they are in their late teens because legally, they can only start withdrawing from the retirement annuity at the age of 55. Even if they do not take over the contributions when they start working and you stop contributing at that point, their money will still grow by virtue of being in the market. If you have a copy of the book From Debt to Riches, see Chapter 7, page 106 the case study on Phili and Sam so you will understand the value of TIME in the market and compound growth

If you want me to help you open a retirement annuity for your children, drop me an email at phumelele@thuthuka-sa.co.za

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