Very few mothers consider that they need to ensure their own financial wellbeing first if they want to be in a position to help their loved ones through tough times. Professor Roseanne Murphy da Silva, President of the Actuarial Society of South Africa, therefore calls on all mothers to celebrate this Mother’s Day by taking the necessary steps to achieve financial security.
“As a mother it gives me enormous peace of mind to know that being in control of my finances means that I’m in a position to help those I care about should the need arise. I have also made sure that I will not place a financial burden on my loved ones as a result of disability, illness or old age.”
Murphy da Silva says many mothers blindly trust that their partners will take care of the financial needs of the family. She adds that allowing the main breadwinner to take care of the family finances is often a default role division, but this does not mean that as a mother you should hand over control of your personal finances.
“Only by empowering yourself to take your own financial decisions and protecting yourself against unexpected life events can you truly secure your financial independence and protect your loved ones,” she says.
She offers the following guidelines for mothers wanting to take control of their financial future:
Have your own bank account
Many women manage day-to-day finances on behalf of their family using bank accounts in their partners’ name or joint accounts. However, Murphy da Silva urges you to take responsibility for your own financial affairs by also having a bank account in your name.
She notes that many women fund household expenses from their salaries, believing they can rely on their partner’s investments and savings for their future. Murphy da Silva explains that arrangements like this usually end badly for women in the event of divorce or death of the partner.
“Having your own bank account means that you and your partner can share expenses more equally. You will then be able to allocate a greater portion of your funds towards your own savings,” she says.
“You also need to know that should your partner pass away, his bank account would be frozen. Having your own account means that you could continue to access the necessary funds without having to wait for his estate to be settled,” she explains.
Plan for your retirement
As equal partners, you and your partner should both have your own investment portfolios and retirement savings tailored to your individual needs, says Murphy da Silva.
She adds that this should be part of a joint plan, which both of you discuss and agree upon.
“Not having savings in your own name is a gamble, as it represents a loss of control over your future,” she warns.
She explains that women will face unique challenges in providing for themselves financially into retirement. For example, women are statistically likely to live longer than men and may therefore need to rely on their retirement savings for many years more.
Furthermore, the 2015 South African Board for People Practices (SABPP) Women’s Report estimates that women earn 15% less than their male counterparts in South Africa. Many women also face breaks in income owing to maternity leave and family responsibilities.
“This means that as a woman, you will have to save a greater percentage of your income than your partner in order to achieve financial security for your whole life. You need to develop an individual retirement saving strategy that will take this into account.”
She states that while a rule of thumb says that the average person should be investing 15% of their pre-tax income for retirement, for women it should be closer to 20%. You could also consider continuing to work part-time after your retirement, she suggests.
“Any savings you can make now will lift the pressure of meeting expenses needed to survive. Working after retirement could then give you some added flexibility and opportunities in terms of your lifestyle and comfort,” she says.
Those earning an income will enjoy tax benefits for their retirement savings through pension funds, provident funds or retirement annuities. However, stay-at-home mothers without a formal income have the opportunity to look into tax-free savings accounts.
“Tax-free savings accounts allow South Africans to invest up to R30 000 each year tax-free up to a lifetime limit of R500 000, making them an attractive investment vehicle for retirement,” she says. Your husband can invest in a tax-free savings account on your behalf without having to pay donations tax.
“Lastly, it is important not to dip into your retirement savings early, even when you are taking family leave. By accessing these funds, you will lose out on the power of compounding for the growth of your savings and compromise your ability to achieve your retirement goals. Your retirement savings must remain a priority.”
Protect yourself and your family
The foundation of any long-term financial plan is having adequate life insurance, disability cover and medical aid in place to help you cope with any unexpected expenses and to continue to provide for your family, says Murphy da Silva.
“If anything were to happen to you, you would want the certainty that your loved ones were provided for. Should anything happen to your partner, you will also need to know the details of any policies in order to take the appropriate steps,” she observes.
She emphasises that stay-at-home mothers should also consider their own life and disability cover because of the valuable role that they play in households.
“Just because you are not earning an income explicitly, it does not mean that there is no insurable value attached to what you do. Think of all the services that your family would need to purchase if you weren’t around to do them,” she says.
She also notes that you should ensure that you and your partner have made allowances for the costs of medical aid in your financial planning to help you cope with health expenses as you grow older.
“Men tend to have higher health costs into retirement and many women find themselves having to unexpectedly care for their spouse, including financially. Make sure that you have both factored the expense of medical aid into your retirement planning, and that you review your policy carefully each year,” she says.
She states that a trusted financial advisor will be able to guide you in developing a long-term financial plan to cope with unexpected events and provide for you into retirement.
“As a mother, its important to know that you can provide for yourself and for your loved ones, no matter what the future holds. Ultimately, by taking an active interest in your finances and participating in decision-making, you will not only protecting yourself, but ensuring a brighter future for you and your family.”