Dikeledi is turning 4 next month. The party invitations are out, and the Unicorn cake order is in. It honestly feels like yesterday that you received the earth-shattering news that made your eyes well up. In Tswana the name Dikeledi means “tears” and considering how long you waited for your first bundle to arrive, the name didn’t only seem appropriate, it felt God sent. Fast forward 47 months, and the question on everyone’s lips is, “Are you going to try for another?” One has been such a blessing, but you grew up as an only child and remember how you longed for a sibling to share in the butterfly catching and tea party set up duties.
You would love to try for another one, but as the 80s band Simply Red put it – “Money’s too tight to mention”.
In a world where money wasn’t an issue, and you could simply walk up to an ATM machine and draw a fist full of cash, whenever you needed to, the idea of having a second, third or even a fourth child would be a lot easier, wouldn’t it?
Having a child is a considerable investment. Having another child is a double up in terms of money and time.
A recent article published on the New
York Times website, called “Americans Are Having Fewer Babies
quoted an interesting Poll. 64% of people polled cited child care being too
expensive as the major reason why they have decided not to have a child or add
a new addition to their family.
If you are considering having a second child, the obvious question you would be asking yourself from a personal finance perspective is:
“Can I afford it?”
If you pulled up a list of all your monthly expenses and factored in the basics like food, clothes, an extra medical aid contribution, then the conclusion you might be able to get to is “YES I can afford to have another child. It’s only going to cost us another R3 000 per month and I have that available in my budget”.
An obvious answer to an obvious question.
But what about the not so obvious questions that require you to dig a little deeper, and look a little further down the road?
Sure, you might be able to afford to have another child today, but what are the implications of that decision 20 years down the line?
- What is schooling likely to cost in the future?
Babies remain babies only for a little while. Then they
start walking and talking, and before you know it, you are up at 06H00 in the
morning packing lunch boxes for school and you are into a 20-year financial
commitment. Education inflation in South African is running at 9% which is
double the Consumer Price Index (CPI) rate of 4.5%. Considering that most South
Africans’ annual salary increases are linked to CPI, it’s easy to see that the
cost of schooling in South Africa (and we haven’t even looked at private school
tuitions) is outstripping earning abilities. The scary thought is that this gap
is likely to widen and who knows what it might cost to send your kid to
university in 18
from now? Probably R1 000 000. Do you have the money today to start investing
for future education costs?
- What will the impact be on my retirement planning?
It’s estimated that almost 50% of South Africans don’t have any retirement savings, and those that do will probably only be able to retire on 20% of their current salary. To say that we have a national crisis on our hands is the understatement of the century. We don’t have a savings culture in South Africa and Government hasn’t provided us with any evidence that they will be able to support millions of us when we decide to hang up our hats for good. It’s fair to say that of the 50% of South Africans who are contributing towards their golden years, most simply aren’t saving enough. If having a second child is on your radar, wouldn’t it be prudent to consider if your own retirement planning is on track before taking the plunge?
While looking after your own financial security might seem like a selfish reason not to have another child, the counter argument is do you think that it’s fair to be a financial burden on your kids the day you retire?
- How secure is my job?
A job means a pay cheque and a pay cheque means financial security. The only issue is that in an economic downturn, companies looking to remain profitable will cut jobs to remain profitable. It’s all about the bottom line, and that really is the bottom line!
Everybody knows someone who has recently been retrenched. The sad reality is that years of service and long-term commitments don’t seem to matter as much anymore. You might feel secure in the fact that you’ve been with a company for 20-years and it will be a ‘first in first out’ scenario if retrenchment letters start flying around the office. That’s a false sense of security and we all know it.
Imagine you’ve just found out that you are pregnant with your second child and in the same month you receive a retrenchment letter from HR. It’s not a big stretch, is it?
The only way you can be sure a curve ball like this doesn’t completely derail you is to have enough money stashed away that you can easily cover 6 months’ worth of living expenses (including the new baby’s expenses).
Life is completely unpredictable and if you don’t have a safety net then your pregnancy might be riddled with financial stress and anxiety. That simply isn’t fair to you or the child you are bringing into the world.
Nothing on earth is more rewarding than having a family of your own, and while we agree that money isn’t everything, it’s what makes the world go round. That’s a fact nobody can ignore.
Until next time.
The Wise About Life Team