A valentine’s gift that is right on the money
This was one of our best read personal finance stories of last year. Worth the read.
Should you treat the valentine in your life with expensive flowers, a watch, a weekend away or a meal out … or is there a better way to show you care about someone with whom you share your life?
You can buy a ring, but it will devalue as soon as you have bought it, says independent financial planner and former winner of the Financial Planner of the Year, Debbie Netto-Jonker.
But there are ways to give something more enduring to the person you love – booking time with a financial planner, starting an investment or even just having a conversation about your shared financial goals.
Having a conversation about your values, the financial goals you want to achieve and whether you are aspiring to the same things is one of the greatest gifts partners in a couple can give each other, Viwe Diyasi, financial planner and general manager at Absa who also holds the Certified Financial Planner accreditation, says.
You need to know how much income you are bringing in to the household, how much you need to live on and to have a mutual understanding of how you will grow your wealth and the critical things that will get you there, Dyasi says.
If you know you are building wealth through, for example, a property portfolio, then you cannot prioritise going out every weekend, she says.
Netto-Jonker suggests you find a fee-based financial planner and pay for a financial plan for your spouse or partner that could set him or her up for a financially secure life. Or better still give each other a financial plan, Netto-Jonker says.
The first meeting with a planner is usually free as good advisers only charge when they know you are comfortable with their services and they can help you, she says.
Women should know that having a man who is the main breadwinner in your life is not enough – a man is not a plan – couples get divorced and partners die - women need their own financial plan that makes provision for the years during which they are raising children and don’t earn or earn less and ensures they have financial stability at all times.
Netto-Jonker says a financial plan should secure areas of interest to the couple and couples should agree how much each partner can spend without recourse to each other and how much is for joint expenses or investments.
Sharing the details of the financial matters you take care of is another great gift, Dyasi says. She often sees widowed housewives who do not know how their spouse made money or how certain parts of the household were run.
Women typically know about the groceries and the cost of children’s schooling or extra murals, but often this information isn’t shared with a spouse who fails to appreciate those financial needs and, in extreme cases, women are forced to borrow to keep the household running.
You need to talk and have mutual understanding of your finances and share a vision of your financial future as a couple, Dyasi says.
She says you don’t need to share bank accounts – in fact it may be better to have separate accounts to ensure that you each have your own credit score and one partner’s bad times don’t adversely affect the others. However, you do need to be open with each other, and you can’t do that if you haven’t even had a discussion about your finances, she says.
Gifts that keep giving to your valentine
IF you want to buy your Valentine a financial gift, try one of these:
· A tax-free savings account. Financial advisers Viwe Dyasi and Debbie Netto-Jonker both believe a tax-free savings account is a great Valentine’s Day gift for those who haven’t made use of the annual tax-free contribution to these accounts.
You can contribute up to R33 000 a year to one of these accounts which offer underlying investments in a range of unit trust funds, exchange traded funds and bank deposits.
The investment returns and capital gains you make on an investment in one of these accounts are tax free.
Starting an investment for someone you love could be a gift that endures as long as your relationship or longer, Netto-Jonker says.
Dyasi says couples and families take holidays, so agreeing to invest in a tax free savings account for a goal like a holiday to Mozambique makes a great valentine’s day gift to each other.
If you think you will use the lifetime contribution limit of R500 000 to a tax free savings account, then rather use it for long-term goals, but the limit is not an issue, it can also be useful for shorter-term goals such as saving for a holiday.
Another goal you could agree to save towards is to pay school fees. Many parents save for college or university education for their children but saving for school fees, even if you do not save the full amount, and paying them in advance, can free up cash in your budget, Dyasi says.
Freeing up cash in your budget means you can have a romantic conversation about saving for a holiday, she says.
· A retirement annuity. Make a donation to start a retirement annuity for a spouse or partner who earns less than you and/or one who needs to take time off to raise children is a very valuable gift and could give your spouse a tax deduction as well, Netto-Jonker says.
You can donate up to R100 000 a year to your spouse without paying donations tax.
· Income protection. Young couples often do not see the need take out life assurance – but they fail to see the need for protecting the most critical possession they have – the ability to earn an income, Dyasi says.
A conversation about death and disability may seem like a romance killer, but giving your partner the gift of peace of mind – knowing that he or she will be okay no matter what happens shows you really care.
Dyasi says often the breadwinner is insured but the spouse who stays at home or who earns less is not. If the breadwinner earns R20 000 a month and his or her spouse R10 000, losing the ability to earn that R10 000 will seriously affect that household, cutting the income by a third.