Start providing for education when a child is born!

Start providing for education when a child is born!

No doubt over the last couple of months you would have heard the renowned Christmas song ‘When a child is born’ many times and if you are expecting the birth of a child soon or recently had a child it may have had special significance for you. At the very least it might have reminded you that as a parent you will have to shoulder some pretty important responsibilities, not the least of which is their education.

At the very early stages of their life, you may not even be considering the future cost of their education but you can take it from us that the right time to start providing for education, is when a child is born! 

So why is this so? Well, a good education, one that will really give them an advantage, even 10 years from now, will not come cheaply and will add a significant chunk to your family budget – and there are many reasons that a good education is the best thing you can give them too. 

What are the benefits of a good education?

There are major benefits derived by children with a higher level of education. Amongst these are…

Better career opportunities – You may be aware that only 14% of learners in South Africa will go to university, and you may say well many people who don’t go to university still succeed, but do you want to decide now to remove a massive portion of the best careers that your child might have to choose from? More career choices could mean a better chance to be hired and enjoy a more fulfilling career.     

Better earning potential – According to research done all over the world, people with higher levels of education and more skills have a much better chance of being hired, earning more money and earning more throughout their working careers.

Better solution-finding skills –  Whether it’s science, business, or the arts research also shows that a higher level of education helps your child develop critical thinking and problem-solving skills. As we well know, it is solutions-driven people who are the most sought-after in many careers.

Better well-being and emotional Intelligence – It is not all about making more money and being smart either. Education at higher levels generally means better and happier schooling with better interactions leading to improved health and well-being. In a world where we will be utilising very high forms of Artificial Intelligence – Emotional Intelligence gained by improved social skills may count for a lot!

How do you benefit from investing now?

As investors, we understand the power of compound interest and know only too well that the sooner we start saving the more our investment in our child’s future will be worth, but there are other advantages too. 

Remember that if you make the right investment you will be able to draw on it annually to pay your school fees in advance and many learning institutions reward this with a substantial discount on your fees. It’s one way to teach your children early on that it pays to save and that having money makes money!  

Also, it’s a good idea to be covered for the worst-case scenarios like if you die or succumb to a critical illness that prevents you from working and continuing to contribute to the fund. Our ‘Educator’ policy covers such eventualities and can be added to whatever else you are planning as your legacy for your family.  

30 years of watching great education pay off

For 30 years Hereford Group have been assisting individuals and businesses to build a better future through making the right decisions early in life. Some of our best clients today are those who benefitted from their parent’s foresight and commitment to giving them a better chance in life through higher education. 

We also know that everyone is unique, with differing financial circumstances, so talk to one of our Financial Advisors today about the best education policies that you can set up in accordance with your current portfolio and affordability. It’s all about time though and the time to start providing for education is when a child is born! 

How will your ‘tax health’ look in 2024?

How will your ‘tax health’ look in 2024
Welcome to a brand new year, one that will, as always, present some challenges but along with challenges come opportunities and no doubt you are entering 2024 with great expectations of improving your life in many ways. 

If you are like millions of others you may well have signed up for a new gym contract or decided to get the bike or the running shoes out so that you can get fit again. This is a good thing because, as we all know, good health is everything and creating wealth is pretty pointless if you are unable to enjoy it.

You can, however, have the best of both these worlds and whilst you get physically fit also get financially fit, something we have written about many times. Financial fitness, like physical fitness, involves regularly exercising good financial principles, like budgeting accurately, saving to invest, protecting your health and wealth and ultimately long-term planning for a good retirement and leaving a worthwhile legacy.

Tax health is the best contributor

What many fail to realise is that a massively important contributor to boosting your financial fitness is utilising the tax allowances and saving vehicles that are willingly provided by the government to encourage retirement savings. There are two in particular that you should incorporate into your financial fitness regime and these are TFSAs and Retirement Annuities.

What are TFSAs?

When you invest in a TFSA, both the growth and the income gained from the investment are tax-free. In essence, this means you will never be liable for any Capital Gains Tax or income tax on the dividends and the interest received. So how much can you invest?

As things stand going into 2024, the maximum amount you can contribute to a TFSA is R36,000 per year (or R3,000 per month) but there is a cap on the maximum you can contribute to the TFSA in a lifetime which is currently R500,000.

One of the benefits of investing in a TFSA is that it is flexible, allowing you to withdraw money from it whenever you wish without incurring penalties, but do note that once you’ve reached your lifetime maximum allowance, you can’t top this up again after a withdrawal!

A couple of things worth noting 

Just a little advice on TFSAs is that although you can withdraw from it this is not advisable and it should be seen as a long-term investment. This is because the returns of your TFSAs will only start matching or possibly exceeding your contributions after about ten years and the value of the tax savings really becomes significant after about twenty years. 

It is also not the only worthwhile tax-saving product and in fact before even considering this one should invest in the other extremely good tax savings retirement product – a Retirement Annuity. This allows you to invest a large portion of your income tax-free and pays great dividends too, so it’s a no-brainer and there will be more on this in a future article.

There is also a lot more detailed information you should know about a TFSA, in terms of setting it up and what other investments should be made in conjunction with it, when considering your long-term investment picture. Your Financial Advisor can assist with all this. 

The group with a heritage of creating financial fitness

Hereford Group Financial Advisors are all highly trained to ensure that you remain at the peak of your financial fitness and to incorporate ‘tax health’ creatively and constructively.

Think of your FA as your financial private fitness coach, as we treat every individual and business as unique entities requiring specialised financial treatment. Talk to a Financial Advisor today to learn more – and watch this space as we continue next month on this important theme of creating and building your ‘tax health’ in 2024. 

Simple or compound interest – when and how to use them

As we approach the end of the year, while you are lounging on a beach or in the bush, your thoughts may turn to building on your wealth for next year. There are always many decisions to be made, as wealth creation can be a complex business. Fortunately, you have Financial Advisors to turn to in this regard, but it is also useful to know as much as you can because good FAs will always work in partnership with you.

An interest in interest

As we all know, when it comes to maximising savings interest is what it is all about. The interest you earn and the rate at which you earn it can make the difference between your savings being eroded quite rapidly or growing exponentially.

As with most things relating to finance, there is never just one option. There are different types of interest, and we thought it may be of interest to you to explore this a little further. So, let’s look at the differences between simple and compound interest – and when and how to use them.

Simple interest

Simple interest grows based only on the money you deposit or invest (the principal amount). The Investopedia definition is ‘’an interest charge that borrowers pay lenders for a loan. It is calculated using the principal only and does not include compound interest.’’

So it’s typically the type of interest that banks pay customers on their savings accounts. To calculate it, you just multiply the loan’s principal amount by the annual interest rate by the term of the loan in years.
A typical example of when simple interest is applied would be with a Fixed Term Deposit which is when you invest a fixed amount for a fixed duration (usually 2 to 60 months), with a fixed interest rate. Because all the variables are fixed, you get a guaranteed growth rate.

Compound interest

We have written many times about the magic of compound interest and this, because you earn interest on the interest you reinvest, is certainly the investor’s best friend. There are simply no limits to how great interest earnings can be as it is entirely dependent on how long you keep the capital amount, plus all interest earned on it, reinvested.

An Income Fund is a good option for investors considering investing in a fixed-term deposit with more flexibility. Unlike fixed deposits which come with a fixed lock-in period, you can withdraw money at any time. It offers liquidity and capital appreciation, and its returns are strong because it benefits from the aforementioned compounding interest.

What is best for you?

The bottom line is which is better for you, simple or compound Interest? Well, compound interest is the better choice if you’re saving money in an account or being repaid on a loan. If you’re borrowing money, however, simple interest is the better choice as you’ll pay less over a period of time.

The best choice always though is to consult with a qualified Financial Advisor in Hereford Group who, apart from being highly skilled as an investment advisor, is also trained to understand that all people are unique and will advise you according to your specific circumstances.

Whatever your aspirations for 2024 may be, this is a great time to revisit your portfolio with your advisor and if you are going to travel these holidays, please do ensure that you have accident, and income protection cover in place as well as an up-to-date Will and a good Life insurance policy.

Talk to us – we are always here to help – and happy holidays!

Female investors will soar in 2024!

Why female investors will soar in 2024!

Not so long ago, when we were honouring women around National Women’s Day, we wrote about what great Investors women can be and the many reasons why they are potentially better wealth creators than men. Recent research has shown that not only is this so, but given the right assistance and motivation, they can become a far more significant force in the investment arena than is currently the case. So, let’s briefly revisit why are they better investors and why female investors will soar in 2024!

What makes women better investors?

In our article ‘Do women view finance differently than men?’ we cited that ‘’Men are more likely to go for new and riskier opportunities, whereas women are more likely to continue to build that nest, filling it with eggs over the long term and not executing many changes along the way. From a long-term wealth creation perspective, like pensions and retirement plans, this is a better way to go, but that does not mean that all Women are inflexible and will not diversify at all.’’

Women are more risk-averse than men and tend to hold onto their investments for longer, which usually results in better long-term performance. Yet there are still many fewer female investors than men, so…

What will break the mould?

These figures, in recent research and well-illustrated in the book ‘The Rise of the Female Investor: Part 2,’ written by Lisa Polson, a Seed Investment Analyst, have been clarified by Polson who says, ‘’alarmingly women invest 29% less than their male counterparts, and only one-third of women have a detailed financial plan in place.’’

This seems incredibly unbalanced given the many reasons women are potentially better investors, so why is this? According to the book ‘’When asked, one of the biggest barriers listed was an unmet desire for assistance. Many women feel they simply don’t know how to get started, and their tendency to be more prudent and cautious can make the process feel intimidating.’’

It is clear that they simply need astute financial advice to launch their wealth creation, and it is also an interesting fact that 70-80% of women find a new Financial Advisor within 18 months of the death of their spouse. This is simply because they have felt ignored or not been willing to add their input when in a partnership.

The Hereford Group Advantage

We firmly believe that in partnership with a good Financial Advisor and given the correct financial advice appertaining to their unique circumstances, female investors will soar in 2024!
As Polson so aptly puts it, ‘’ The truth is that female clients aren’t worried about the gender of their Advisor. They’re looking for an Advisor who can work with them in a supportive, collaborative and holistic way, as well as one who can notice and adapt to the nuances of working alongside a female client.’’

Hereford Group have admirably succeeded in the past 30 years by recognising that everyone, regardless of gender, is important and unique with specific requirements and aspirations for their future.

Male or female, talk to us in 2024 to review your portfolio and start you on the path to your most prosperous year yet. Also, if you are travelling for the holidays, talk to us now about ensuring you have a finance safety check – like accident and income protection cover, and a Will and Life insurance in place.

Travel safely, thanks a million for your support in 2023 and have a spectacular 2024!

AI will never replace the fundamentals of Financial Intelligence

AI will never replace the fundamentals of Financial Intelligence

There has been a lot of controversy about AI recently and innovations like ChatGPT have been responsible for people striking in protest and even for governments examining if a future utilising all the elements of AI is a good one.

There is no doubt that in medicine and many other fields AI and robotics have been revolutionary in assisting to advance certain industries and when it comes to finance there will be certain AI applications that will assist people to conduct better forecasts of shares and be of great assistance in certain areas of finance and accounting.

One thing that is for sure though, is when it comes to wealth creation Artificial Intelligence will never be able to change the essence of what people aspire to and why they build wealth at all. Simply making money for the sake of it is really not why most people try to get rich, there is a much more of human element to it – or an Emotional Intelligence element (E.I) if you’d like to call it that.

There is Financial Intelligence too.

Good financial Advisors understand this human element and in fact it forms the basis of constructing a good wealth profile that serves someone throughout life’s most unexpected twists and turns. We call these fundamentals of wealth creation ‘Financial Intelligence’ and the fundamentals of Financial Intelligence all revolve around human feelings and choices. Some of these are…

Long term thinking

Critical to wealth creation is adhering to the basics of compound interest and this involves deciding to invest in the long term and have the resilience to remain invested when things get tough. AI may be able to make long-term projections based on past performances, but it can’t convince someone to have the Financial Intelligence to start investing for the future as soon as possible, and stick with it.

Health and wealth preservation

One of the most basic human instincts is one of survival and Financial Intelligence means looking after your health, including having medical aid cover and Critical Illness cover. To ensure your wealth is not eroded in times of poor health it’s prudent to have income protection too.

AI may be able to assist Medical Aid providers by crunching the numbers to assess what they can afford to cover or not cover, but it can’t convince somebody to protect their and their family’s health and subsequently their wealth.

Leaving a legacy

AI may be able to assist Financial Advisors and Actuaries to calculate your wealth in a certain number of years based on your current progress etc, but the reality is that life itself is not predictable. What AI can’t do is convince a human being to at least have Life cover (which is very affordable) and the responsibility to draft a legally binding Will. Additionally, through Estate Planning, they can leave the best legacy possible for their remaining family. This kind of human decency way surpasses any kind of artificially created assistance.

Understanding that we are individuals. 

What AI dismally fails to do is to individualise its offerings, whether they be mathematical or seemingly creative it is the same information spewed out for all, regardless of who inputs it. For us in Hereford Group this is a massive flaw as we have prided ourselves over the last 30 years on understanding that every individual and business is unique and has their own specific needs and aspirations.

Talk to us about your personal requirements and let us assure you, Artificial Intelligence may be in the background assisting us as a useful tool, but we will be serving you as a human being with fundamental Financial Intelligence!

Diversity can yield a great financial heritage too

In South Africa in September we celebrate our Heritage Day. It is a day of celebration and the enjoyment of the start of Spring –  and we add an additional fun element of naming it our ‘National braai Day!’ On the serious side, however, we are reminded that it takes a diverse set of people, all different in their cultures, traditions and skills to make up the great melting pot that we now love to call ‘The Rainbow nation.’

As financiers we can greatly identify with the strength that is found in utilising diversity to create a cohesive and stronger whole end result when structuring wealth profiles. It is in utilising diversity that we create more flexible and more resilient wealth profiles for our clients and after a few generations one could say that this wealth creation is your ‘Financial Heritage.’

So how and in what areas of wealth creation do we utilise diversity to build a Financial Heritage of which you can be proud…

Diversity of structure

Every wealth profile has to be well structured and include diverse elements. Not only should you be invested in your retirement and a great financial future but also have ways to pay less tax, be protected against unexpected health issues or accidents and have a legacy to leave your family of which you can be proud.

Diversity of investments

It is critically important in an investment portfolio to have diversity as this assists you to have protection in fluctuating markets, and let’s face it market fluctuations are just a fact of life. With a diverse portfolio though when one investment plummets you will have others that keep you on an even keel and able to ride out the storm.

Many of our clients were very grateful for this when the pandemic caused havoc with the markets and they suffered only minor damage. Many in fact were even still able to invest at this time when prices were down – always the best time to invest.

Diversity of Assets

We also always advise that wealth should be spread into various areas. Property, especially in Cape Town is a good investment usually and this should be complimented by market related investments which can also be split into local and offshore and long and short term. These choices are up to the individual but good Financial Advisors will always suggest a diverse set of income yielding assets.

Diversity of skills

Great strength can be found when we utilise the professional skills of various people to assist us to create wealth. Just as when you want to improve your health you will enlist the skills of a Personal Trainer or to build a great business you would call on the help of a good Business Coach, when you want to build wealth it is a good idea to benefit from the expertise of a good Financial Advisor.

Hereford Group’s Financial Advisors train for years and never stop keeping their ears to the ground to ensure that they can offer our clients diverse choices so that together with you they can ensure your specific wealth profile has all the elements of a good, interest bearing, hard-working, well-protected portfolio.

Talk to us today and let’s begin to combine our expertise with your ideas and aspirations to create your family’s Financial Heritage!