Michael Rossouw, Senior Investment Consultant at 10X Investments (and some mother’s sweet child), outlines a Mother’s Day gift that might just make you Mum’s favourite (if you aren’t already … I am though)
Mother’s Day is around the corner and the advertisers are trying to persuade you to buy some chocolates or flowers for your original First Lady, but how about giving her something more meaningful this year. Helping her to get her finances on track is a gift that will keep on giving all year long and beyond.
Money can be a tricky topic to broach with your parents and giving advice to your mother may seem a bit presumptuous, but even the savviest of people can sometimes do with another perspective. Besides, your Mum will surely know that you are interested only in helping her to have the best possible outcome.
Maybe your mother has everything under control and she will use the opportunity to share a bit of financial advice with you. That should set your mind at ease and give her some pleasure (plus you get to learn something from a real pro).
If not, any awkwardness will be forgotten when your Mum sees how easily she could get a handle on what may seem like a daunting business simply by asking questions and taking charge of her finances.
Take retirement planning, for example, even the simple first step of getting a clear picture of her financial situation will most likely save her a lot of worry and possibly mean quite a bit more cash in her pocket.
If she is not yet retired ask her what her plan is. Tell her you want to make sure she is on track to being comfortable and worry-free in her golden years. You might be surprised to hear that she has been feeling concerned about it but didn’t want to worry you.
If she is already retired and drawing an income from her savings it is worth suggesting she double-check that she is not drawing too much or paying away a fortune in fees. She can use the 10X Investments’ Living Annuity calculator to work out how long her savings will last, based on the amount of income she is drawing each month and, importantly, how much she is paying in fees.
She might be spending more of her savings than is sustainable and storing up discomfort for when she is older.
On the other hand, she might be spending less than she could be because she is anxious about outliving her savings. No one wants to see their mother living a meagre existence and worrying constantly about money, especially if she actually has enough saved to live a comfortable retirement.
If she is losing a fortune in fees you can help her get on the path to a big saving. A simple fee analysis and cost comparison by 10X Investments would help her see how things would look in a low-fee environment. Moving from a high-cost annuity to a low-fee one would mean either an instant pay increase or the peace of mind of knowing that her retirement savings will last that many more years.
Imagine your mum is drawing down a total of 5% of her capital each year, of which she is paying the industry average of 3% in fees. Someone else is taking 60% of her earnings; she is left with just 40%. Moving to 10X Investments, which charges less than 1% plus Vat in fees, your mum could continue to draw down 5% of her total savings, but pay herself a lot more ie more than 80% of the drawdown goes to her.
If your mum is still in the saving stage of her life she can work out if her retirement savings plan is on track by plugging a few basic numbers into the 10X retirement savings calculator.
Both the Living Annuity Calculator and the Retirement Savings Calculator allow individuals to adjust the various inputs to calculate the best plan for their own circumstances, whether that be in terms of how much they are saving each month or how much they are drawing down each month as an income.
If your mum is a little tech-phobic, both calculators generate plans in PDF format that can be emailed and printed out for those who prefer paper versions.
Then again, your mum might be a computer whizz and not need your help once you have pointed her to the online calculators. If you are surplus to requirements at this point you could offer to get her a glass of wine or a cup of tea while she crunches the numbers.
To make your bid for top position amongst your siblings an absolute slam-dunk we suggest you add a beautiful piece of jewellery hand-crafted by the one and only Barbara Magrath of Dragon Fire Beads.