Cash club: Am I saving enough for my child?

How much is enough when you’re saving or investing for your newborn child?

It’s a tricky question to answer. First up, I think there are far too many unknowns regarding expenses in the future. It’s equally difficult to determine how much I need to save today to ensure I have enough for tomorrow.

We can pull a number out of thin air and find ways to justify it, whether it’s a percentage or in rand. But the truth is, nobody knows how much will be enough. What we do know is that we want to have more money than we need. At least, that’s what most people hope for.

The same applies to our young ones. We want to give them more than they would need when they are grown up.

This uncertainty brings a lot of fear, causing some people to default to a mindset of “sobona phambili” (“I’ll see in the future”) or the famous “we’ll cross that bridge when we get there”, not realising that this approach can set up a future debt trap.

There is a misconception that you need truckloads of money to invest, or that small amounts are pointless because it won’t be enough. When I decided to invest for my son in the Satrix 40 and Satrix S&P 500 (which I will change to Satrix World) ETFs, I knew that the amount I’m currently investing may or may not be enough for him when he’s older. It may not buy a fancy car, or pay 100% of his tertiary fees, but I know it will pay for something. It can reduce the amount of debt needed to fund his education, or whatever needs funding at that point in time.

So to new parents, and especially those in the low-income bracket, you need to save as much as you can afford. If you can only afford to invest R100, by all means, do that. It may not pay for a lot but it will pay for something and reduce the debt needed. Remember, you won’t stay in the same income bracket forever. Start building that safety net for your child early, it will definitely grow over time.

Compound interest is more about time than the principal amount. The biggest asset we have, especially in the financial environment, is time.

Njabulo Nsibande is a Just One Lap user-turned-contributor and a founding member of an investment club. His “Cash Club” blog details his experiences balancing the financial obligations of a young parent with his investment aspirations.

Follow Njabulo’s journey here every month. You can also follow his trading journey by listening to his Village Trader podcast.

Find him on Twitter: @njabulo_goje.