As the year winds down, many of us are counting the weeks to that well-deserved year-end break – whether it’s an exciting trip with loved ones or a peaceful retreat at home. However, before you shift into holiday mode, now is the perfect time to pause and take stock of something extremely important – your estate plan. Ensuring everything is in order now will give you peace of mind for the year ahead.

A common response to most estate planning questions is: “I have a will, I’m sorted, thanks.” But as a Chartered Accountant CA(SA) and Certified Financial Planner CFP, with a passion for comprehensive estate planning, I have seen the true value of having a well-considered estate plan ready to meet your loved ones’ needs.

What many people overlook is that estate planning extends far beyond having a signed will in place. Vital aspects need to be considered while reviewing your estate plan. Below is a list of some important points – but there are more to consider:

• Is there sufficient liquidity in your estate?
• Have you considered the level of estate duty and capital gains tax applicable to your estate, and what can be done now to minimise these wealth taxes?
• Should the unexpected happen, how long will it take for your family to wind up a deceased estate, and will your heirs need financial support in the interim?
• Have you been made aware that there are some assets over which your will has no authority?
• These assets include: retirement funds, living annuities, life policies and offshore endowments, which we term ‘non-will assets’. Thorough estate planning involves considering the nominated beneficiaries of these non-will assets to ensure they align with your wishes.
• Who has the necessary skills and contacts to wind up your estate? Should you burden a family member with a sole executor appointment?
• What can an executor charge a fee for?
• Have you thought about other miscellaneous costs incurred in the winding up of an estate, such as: conveyancing fees, tax consultant fees and the Master’s fee?
• Are you associated with a private company or family trust, and how do the shareholdings in and loans to and from these legal entities impact your estate plan?
• If you own and manage a successful family business, have you considered proper succession planning for the children involved in the business? Having this in place is crucial and ensures that family wealth continues in the most tax-efficient way for future generations. Passing on intergenerational wealth via a local or offshore trust and investment holding company structure is one potential solution.
• If you’re a high-net-worth individual in possession of offshore immovable property, have you considered where that property is domiciled? This will directly impact the succession of the property. For example, immovable property in France is subject to French succession law. Forced heirship rules protect direct descendants and surviving spouses, which must be adhered to regardless of what your will states. For example, if you have one biological child, he or she automatically takes ownership of 75% of that immovable property, while your surviving spouse receives only 25%. Your heirs will also be personally liable for any liabilities relating to this immovable property according to France’s succession laws.
• In terms of bank accounts domiciled in the UK, probate in the UK is required. Probate is the official proving of a will. Planning ahead with a financial planner well-versed in cross-border estate planning can help avoid potential delays in winding up your worldwide deceased estate and reduce high costs associated with UK solicitors.
• For ownership of UK immovable property, we look to the succession laws in the UK. Fortunately, like South Africa, the UK adopts freedom of testation. However, it is recommended that a UK will be drafted to address this immovable property.
• Estate planning is invaluable for the global investor and is a discipline in itself. If you are a South African owning direct offshore shares, this can be attractive from a rand hedge and South African political and economic perspective. However, this is not the case from an estate planning point of view. It is important to note that there is a risk of foreign inheritance tax that could apply to these direct shareholdings upon your death, as the situs (location) of the shares will determine additional tax consequences. Only a few countries have double inheritance tax treaties with South Africa. Properly structuring these offshore shareholdings can make a significant difference and help avoid the risk of hefty foreign inheritance tax.

All of the above may seem overwhelming, which is why I advise my clients to dedicate time to their estate planning, starting with smaller, more manageable tasks and gradually working up to the bigger issues. Here are some practical tips:

Granting a general power of attorney to your spouse and adult children has proven to be incredibly useful should you ever fall physically ill but retain your mental capacity. South African banks, however, will only accept their own special power of attorney for your bank accounts, so it is important to have this in place. I also encourage my clients to update their digital estates template once a year to keep their various online usernames, PINs and passwords valid and stored with recent copies of their will and general power of attorney.

Drawing up a monthly spending plan detailing how bills are settled (debit orders vs EFTs) and keeping it up to date is a simple task I recommend my clients manage consistently. Should the unexpected ever happen, your surviving spouse and adult children will be better equipped to navigate their new normal with financial guidelines to assist them.

A letter of wishes can be a thoughtful and meaningful way to communicate your desires for the distribution of sentimental items. It allows you to provide clear guidance to family members and avoid misunderstandings or conflicts after you’re gone. Yes, it’s about the big things, but also the little things that prove to be so powerful when a loved one passes away. The overall aim is to have an airtight estate plan that makes things as stress-free as possible for those you leave behind.

As our population ages, more and more families find themselves grappling with the complexities of caring for elderly parents. This often includes managing their financial and legal affairs, which can be a daunting task. For many, the intricacies of power of attorney (POA) can add to the stress. Understanding the legal framework and practical steps involved in establishing and managing a POA is crucial for ensuring the affairs of ageing parents are handled smoothly and effectively.

POA is an important legal instrument that allows one person (the principal) to appoint another (the agent) to act on their behalf. In South Africa, this document is essential for managing various affairs, especially when the principal is unable to do so themselves. However, the principal must be of sound mind when granting a POA, and the situation becomes complex if they are later declared mentally incapacitated.

Unlike some other jurisdictions, South African law does not currently recognise an enduring power of attorney (EPA). Despite recommendations from the South African Law Reform Commission to introduce this concept, it has not been incorporated into the legal framework. This means that once a person is declared mentally incapacitated, the power of attorney automatically lapses.

For a POA to be valid in South Africa, it must meet several requirements:

• The POA must be in writing.
• It should clearly outline the powers granted to the agent.
• The principal must sign the document.
• The principal must be of sound mind when granting the POA.

Banks require a separate, in-person process for granting POA for banking purposes due to financial safeguards.

The requirement for the principal to be of sound mind is critical. It ensures that the principal fully understands the implications of granting a POA and can make informed decisions. Mental capacity is a safeguard against potential abuse and ensures that the principal’s best interests are protected.

In South Africa, a POA automatically terminates if the principal becomes mentally incapacitated. This poses significant challenges, especially if the principal’s affairs need ongoing management. Here are the steps and legal processes involved:

1. A general POA ceases to be valid once the principal is declared mentally incapacitated, which must be determined by a registered physician.”

2. Under the Mental Health Care Act, the Master of the High Court can appoint an administrator to manage the property of an incapacitated person. This process is typically less costly than appointing a curator bonis and is usually granted to a family member. For this appointment to proceed, the court will assign an investigator.

3. The High Court can appoint a curator bonis, a professional responsible for managing the financial affairs of an incapacitated person. This process requires a court application and is generally used when there is no family nearby or willing to take on the role.

Practical tips for managing affairs while applying for administration

1. Ensure you have access to important passwords and login details for online banking, e-mail and other essential services so you can continue paying necessary expenses while applying for administration.

2. Maintain the principal’s cellphone service to receive important notifications, verification codes for online transactions, banking alerts and one-time passwords (OTPs).

3. Ensure you keep accurate records of all banking transactions for the investigator.

Managing the affairs of a mentally incapacitated person in South Africa requires careful planning and legal guidance. While the lack of an enduring power of attorney adds complexity, understanding the available legal options and practical steps can help ensure that the principal’s affairs are managed effectively. Consulting with legal professionals is crucial to navigate the legal processes and ensure compliance with South African laws.

By being proactive and prepared, you can better manage the challenges that come with mental incapacity and ensure that your loved one’s affairs are in good hands.

Raising financially responsible children in today’s fast-paced world is crucial for their future stability and well-being. With the allure of instant gratification through technology, children are often exposed to spending without understanding the value of money. Starting financial education early can set them up for a lifetime of smart money management. In South Africa, where economic challenges are prevalent, teaching financial literacy to the next generation is vital. But at what age should you start, and how do you introduce complex topics like credit scores, interest rates and debt? Here are some practical steps for raising financially responsible children.

Start early with basic money concepts

Children as young as five or six can start learning the basics of money. Introduce them to the value of different coins and notes by letting them handle small amounts of cash. You can give them a weekly allowance, encouraging them to make decisions about how to spend it. By using a small allowance, children can experience the consequences of overspending and learn to make more thoughtful decisions.

Involve your child in small household decisions. For instance, when grocery shopping, explain why you choose certain brands or why buying in bulk can save money. This instils a mindset of value-driven purchasing early on.

Introduce savings with a goal in mind

The idea of saving is another foundational concept. Encourage children to set savings goals, such as saving for a toy or game.

A great tool for teaching savings is the “three-jar method”: one jar for spending, one for saving and one for giving. This teaches them the importance of allocating money towards different purposes, such as immediate needs, future purchases and charitable giving. Over time, children will learn the benefits of delaying gratification and saving for future needs.

Gradually introduce more complex financial concepts

As your child enters their teenage years, they’re ready to handle more complex financial ideas, like budgeting, managing debit and credit cards, and understanding loans. One critical lesson is explaining what a credit score is and why it matters. A credit score reflects how responsibly someone manages credit, and it plays a significant role in their ability to borrow money, rent a home or even secure jobs in the future.

You can explain how a credit score is influenced by factors like making payments on time, keeping balances low on credit cards, and limiting new credit applications. Although South African teenagers aren’t likely to have credit cards, they can learn by observing how you manage your credit and by understanding the consequences of late payments.

Teaching interest rates and compound interest

Interest rates can be a tricky concept, but you can teach it with practical examples. Start by explaining that interest is either the cost of borrowing money or the reward for saving it. For instance, if they borrow R100, and the interest rate is 10% annually, they will owe R110 at the end of the year. Similarly, if they save R100, they will have R110 after a year.

To help them understand compound interest, use a real-life savings example. If they save R500 in a bank account offering 5% annual compound interest, show how their money grows over time. In the first year, they will have R525. In the second year, the 5% interest will be applied to R525, giving them R551.25, and so on. This practical demonstration can make the concept clear and engaging.

Use online tools and games

Online tools like compound interest calculators can make learning about interest more interactive. These calculators allow you to input different amounts, interest rates and timeframes to see how money grows or how debt accumulates. For example, they can experiment with how saving for five years versus 10 years affects their savings, helping them grasp the importance of early saving.

Games such as Monopoly can be tweaked to simulate interest, showing how debt grows if not paid off quickly. Additionally, financial literacy apps offer engaging, game-based lessons that make learning about money fun.

Real-life applications: Budgeting and debt management

Help your teen create a realistic budget for essential expenses like clothes, toiletries and leisure activities. This teaches them the importance of living within their means and planning for unexpected costs. Budgeting apps like YNAB (You Need a Budget) or 22seven are great tools to track spending and visualise how small expenses add up over time.

Introduce the concept of different types of loans – student loans, personal loans and home loans – and explain how repayment terms, interest rates and the length of the loan affect the total amount paid. Teach them the difference between “good debt”, like education loans, and “bad debt”, like high-interest credit card debt, to help them make smart borrowing decisions.

The importance of an emergency fund

An essential lesson is explaining why it’s important to save for unforeseen circumstances. Teach your child to set aside a portion of their income for emergencies like medical expenses, car repairs or replacing a broken phone. Having an emergency fund can help avoid falling into debt when unexpected costs arise.

Investing basics

Even though investing can seem complex, it’s never too early to introduce teens to basic concepts like stocks, bonds and mutual funds. Explain how investments grow over time and why investing early can help them build long-term wealth. Understanding the basics of investing prepares them to make informed decisions when they start earning their own money.

Teaching financial responsibility to children and teens is an ongoing process that requires patience, practical examples and real-life applications. Starting with basic money concepts and gradually introducing more complex ideas can help set your children on a path to financial success. With the right knowledge, they’ll be well-equipped to handle the financial challenges that lie ahead in South Africa’s economic landscape. For more information, visit www.charteredwealth.co.za.

We South Africans love our cars – whether it’s a sleek new model, a massive off-roader or a customised, souped-up machine. Globally, cars are seen as status symbols, and many of us feel pressured to keep up with the trends, often diving headfirst into purchasing one.

But how much do our immediate lifestyle decisions – like buying that dream car – impact our long-term financial health? Let’s take a closer look, using cars as an example, because they’re a highly emotional (and very expensive) purchase.

The dream car dilemma

Let’s say my dream car is a VW Tiguan. I went online to build my ideal version, and here’s what I found: the base price of a brand new VW Tiguan 2.0 TSI is R861 600. But of course, I wanted some extras – upgraded paint, rims, a better sound system, a sunroof and safety features. Throw in a sports package and my dream car now costs a staggering R987 850 (including VAT).

I have two choices:

1. Pay nearly R1 million upfront (which, let’s be honest, most of us don’t have).

2. Finance the car with a vehicle loan.

If I choose financing, my monthly payment would be around R19 500 for six years (based on a 12.25% interest rate). By the end of that period, I’ll have paid about R1.4 million in total. Suppose I’m denied finance; I could opt for a “more affordable” balloon payment option. It will then cost me R17 000 per month over six years, with R258 480 outstanding and immediately payable at the end of the contract.

But what if, in a parallel universe, a more practical version of me exists? He sits down with a financial planner and runs the numbers. Instead of buying the car, he invests R17 000 per month for six years, earning 10% per year. By the end of those six years, he could have a potential investment portfolio of R1.58 million (around R1.1 million in today’s terms.)

The real cost of a car

Let’s see what happens if I stick with my dream car. After six years, it’s estimated to be worth around R438 000 as a trade-in (assuming 15% depreciation each year). Adjusted for inflation, that’s only about R300 000 in today’s buying power. Meanwhile, I’ll have spent over a million on financing and will be left with very little to show for it. In fact, I’d have lost nearly R800 000 in the process.

Sure, I could cover the balloon payment by trading in the car, but I’d be left with almost nothing to put towards my next vehicle.

The bigger picture: Freedom vs debt

What would an extra R1.58 million mean for my future? In a world focused on instant gratification, it’s easy to forget that retirement – and financial freedom – are real things we need to plan for. Investing this extra money at age 44 could mean reaching financial independence sooner. The funds could continue to grow, potentially providing a passive income or giving me the freedom to pursue new goals and live life on my terms.

We haven’t even explored other options, like adding additional funds to your home loan, investing in income-generating assets or starting a business. All of these are alternatives worth considering.

Flexible alternatives to buying new cars

I used an expensive car as an example, but the principle applies to most new vehicles. Luckily, more affordable brands in South Africa offer similar value without the hefty price tag. Plus, there’s always the second-hand car market, where you might find a vehicle that holds its value better.

In recent years, leasing a car has become a popular option for those who prefer to avoid the long-term financial commitment of buying a new vehicle. However, leasing can still significantly impact your budget, so it’s important to carefully consider this option and ensure you can comfortably manage the monthly payments before committing.

The trade-off

Every financial decision is a trade-off between today’s wants and tomorrow’s needs. Many of us live by the “you only live once” (YOLO) mentality, but that mindset can be short-sighted when it comes to our finances. A better mantra might be: “You only live once, but for longer than you think” (YOLOBFLTYT) – you need to plan to live to 100!

Do I still want the dream car? Of course. But not if it means sacrificing my future financial freedom. That’s why it’s so important to talk to an independent financial planner before making big decisions like this – because your choices today will shape the lifestyle you’ll enjoy tomorrow.

Are you juggling the responsibilities of supporting your parents, adult children and possibly even grandchildren? If so, you might be part of the Sandwich Generation. In my financial planning conversations with clients, this balancing act comes up in at least 35% of our meetings, reflecting a growing trend. According to the Old Mutual Savings and Investment Monitor research report, the “Sandwich Generation” increased from 39% in 2022 to 43% in 2023.

While having your children, their children and parents living with you can be incredibly rewarding, the responsibility can be overwhelming. Balancing financial resources, time and emotional energy while planning for your own secure future can seem nearly impossible.

Ask yourself:

• Can you afford to support children who should be supporting themselves?
• How does this affect your retirement savings?
• Would you need to cut funds available for your own medical care and living expenses as a result?
• What is the long-term impact of the permanent loss of capital and compound interest from a drawdown?
• Will your adult children be able to support themselves if something happens to you?
• Will you eventually need your adult children to look after you?

The impact of enabling dependency

It’s important to consider that you may not be helping your adult children by enabling them to rely on you for financial support. They miss out on building their own income and learning crucial life skills, and their dependency can erode their confidence and hinder their ability to re-enter the workforce. Striking a balance between offering support and encouraging independence is essential. Continually supporting your adult children can perpetuate a cycle of dependency, which isn’t beneficial for anyone involved.

Tips to manage the delicate balance

When it comes to your children:

1. Encourage responsibility and accountability

Teach your children the importance of responsibility and accountability. Encourage them to find work, whether part-time or not, in their preferred field. Any contribution they make towards the household helps build their confidence and reduces your financial burden.

2. Support beyond finances

Offer assistance with job applications, help improve their CVs and pay for coaching or psychological support. Enrol them in courses or connect them with financial planners or business coaches. Brainstorming creative income ideas together can be particularly beneficial. Some ideas my clients have successfully implemented include teaching English as a foreign language, house-sitting, pet-sitting, participating in online surveys, creating digital products (e-books, online courses, presentations), engaging in affiliate marketing, earning royalties from intellectual properties (books, music, patents, graphic designs) and renting out equipment or property (eg, cameras, drones, parking spaces).

3. Set boundaries

If your children return home temporarily to reset their lives, that’s understandable. But if this becomes a recurring pattern, you may be enabling them never to manage their own money. Think about putting boundaries in place to protect your financial security. Teach your children about money management, involve them in financial conversations and set a date when financial aid will stop.

4. Involve children in money conversations

It’s never too early to start speaking to your children about money and teaching them the skills needed for future financial independence. Discussing money openly can demystify money management and encourage responsible financial behaviour.

5. Encourage and celebrate failure

Children need to fail to learn, grow and develop. Let them navigate challenges and find solutions independently. Celebrate their efforts and resilience. Consider asking your financial planner to meet with them and work out a plan. Failure can be a powerful teacher.

When it comes to your elderly parents:

6. Support your elderly parents early

Consider supporting your elderly parents before their money is depleted. Parents are living longer, and in many cases, their funds run out before they pass away, leaving you with the financial burden of looking after them. By contributing a smaller amount early on, you can help extend the lifespan of their retirement investments, delaying the need for more substantial financial support later.

7. Research and compare retirement care options

Many retirees are determined never to move into a retirement estate, often preferring live-in carers. Carers are expensive, and this cost burden eventually gets transferred to their children. Make time to research the costs of retirement or community care homes versus the cost of a live-in carer for yourself and your elderly parents. Consider long-term benefits and make informed decisions.

Being part of the Sandwich Generation is undoubtedly challenging, but finding a balance that supports your loved ones while securing your financial future is possible. While caring for your children and elderly parents may be extremely rewarding, you must make informed decisions. You don’t want your children to eventually look after you if you deplete your retirement savings due to being wedged between two dependent generations. Meet with your financial planner and ensure that your long-term plan for your second chapter includes a fulfilling life for yourself plus provision for any long-term care needs. It is possible to navigate complex situations that balance your responsibilities and financial goals.

As a financial planner, I’ve seen clients struggle with the responsibilities that come with inheritance. Often, beneficiaries are unprepared, lacking what I call “financial maturity” – the understanding and experience needed to manage inherited wealth effectively. Financial maturity means understanding the value of money, making informed decisions and feeling comfortable with financial responsibilities.

Emotional complexities of inheritance

Inheritance can come with emotional baggage. Some clients receive money from relatives with whom they had strained relationships, leading to feelings of guilt or reckless spending. Younger beneficiaries, in particular, may feel disconnected from the inheritance, viewing it as not truly theirs. This emotional complexity can significantly impact how they handle the money.

Importance of financial maturity

The biggest burden arises when the inheritor lacks financial maturity. For instance, I’ve encountered spouses overwhelmed by financial management after the death of their partner, simply because they were never involved in the financial planning. This fear and anxiety can persist even when significant funds are available, leading to a life lived in unnecessary scarcity.

Financial maturity is crucial when one partner has always controlled the finances. On their passing, the surviving spouse can feel overwhelmed and anxious about managing the money. This scenario is all too common and highlights the need for both partners to be involved in financial planning. Without this involvement, the remaining partner may live in fear and scarcity, despite having adequate funds.

Strategies for leaving a legacy without burden

1. Open communication

Discussing financial plans with your spouse and beneficiaries ensures they understand the purpose of the inheritance and are prepared to manage it. No matter how uncomfortable, these conversations can prevent future financial difficulties.

2. Involve loved ones in planning

Regularly involve your spouse in financial decisions and planning to build their confidence and knowledge. This shared responsibility ensures that both partners are prepared for any eventuality.

3. Educate and prepare children

Share your will and estate plan with your children. Allow them to ask questions and understand your intentions to prevent future mismanagement of funds. Involving them early helps build their financial maturity and ensures they are ready to handle the inheritance responsibly.

4. Address emotional complexities

Acknowledge the emotional aspects of inheritance and provide support to help beneficiaries deal with these feelings. This can prevent emotional decisions that might negatively impact their financial future.

Inheriting should be seen as a gift and a legacy to be honoured, not a burden. Proper preparation and communication can empower beneficiaries to manage their inheritance confidently, turning potential burdens into lasting legacies. By fostering financial maturity and involving loved ones in financial planning, you can ensure that your legacy is managed wisely and fulfils your intentions.

Ultimately, the best way to honour the legacy of a loved one is by being prepared and empowered to manage the inheritance with confidence. This approach transforms potential burdens into lasting legacies, ensuring the inheritance serves its intended purpose and supports the beneficiaries’ financial well-being. For more information, visit www.charteredwealth.co.za.

As is the reality for many South Africans, many of our clients have children or heirs living abroad. This dynamic adds an additional layer of complexity to estate planning and often raises the important question of how to ensure a smooth transfer of assets while protecting your wealth. Navigating the intricacies of estate planning becomes even more crucial when your loved ones reside in another country. In this article, we will explore practical considerations specifically tailored to South African residents with children or heirs living abroad, offering insights and strategies to help you manage this unique estate planning landscape.

Managing investments: A clear understanding

Estate planning entails having a clear understanding of how your investments, both local and offshore, will be managed and distributed by the executor of your estate. However, being well-informed and proactive becomes even more critical when your heirs reside in another country. It is essential to have a comprehensive grasp of how your investments will be handled and ensure that your intended beneficiaries receive their rightful share.

Assets outside the estate winding up process

Certain assets may not automatically be included in the estate winding-up process, but this does not exempt them from estate duty tax obligations. As a South African resident with heirs living abroad, it is crucial to explore how such assets will be distributed and consider the available options, such as individual ownership or placing assets in local and offshore trusts. Understanding each option’s implications will help you make informed choices that align with your specific circumstances and protect your assets.

Varying timelines for inheritance

The timeline for heirs to inherit assets can vary significantly, especially when international factors come into play. Factors such as including assets in the estate winding-up process and the involvement of entities like the Master’s office, Deeds office, and SARS (South African Revenue Service) can introduce complexities and potential delays. People with heirs abroad need to grasp their own timeline expectations and effectively communicate them to their heirs. By managing expectations and providing your heirs with a clear understanding of potential inefficiencies, you can help them navigate the complexities of the inheritance process and minimize any challenges that may arise.

Inheriting assets in their pre-death form

One advantage for heirs living abroad is the ability to inherit assets in the form they were in before your passing. This means that heirs residing in another country can hold South African-based assets (such as property or a share portfolio) and offshore-based assets without needing immediate redemption. However, it is advisable to check with your heirs regarding any country-specific exceptions or regulations that may apply. Ensuring that your heirs are aware of their rights and limitations can prevent complications and facilitate a smoother transition of assets across borders.

Estate planning for South African residents with children or heirs living abroad requires careful consideration and attention to detail. By understanding how to effectively manage investments, navigate assets outside the estate winding-up process, anticipate varying timelines for inheritance, and consider the impact of different jurisdictions, you can ensure a seamless transfer of wealth and protect your legacy.

Please contact your Financial Planning Specialist if you have any questions or require further assistance in addressing these considerations.

The state of Eskom and the frequent load-shedding have understandably caused distress among many South Africans, who are now seeking alternative energy solutions. Fortunately, solar power has emerged as a popular option, offering reliable and cost-effective electricity for households. At review meetings, I often get asked whether renting or buying a solar system is better and how each option would impact long-term finances. However, the decision to rent or buy a solar system isn’t a one-size-fits-all solution, and it’s crucial to weigh the pros and cons of each option before deciding.

To make an informed decision, it’s essential to have a clear idea of the appliances that need to be powered by the solar system before requesting quotes. When considering buying a solar system, it’s important to take into account the upfront costs. The cost of purchasing a solar system varies significantly based on the system’s size and the number of panels needed to power your home. Nevertheless, it’s worth bearing in mind that buying a solar system can increase the value of your home and even help you recover the installation cost when you decide to sell your property, depending on market conditions at that time.

It’s also essential to factor in the ongoing maintenance costs of a solar system. Although solar panels require minimal maintenance, inverters and batteries may require periodic replacement, which can increase the overall cost of ownership. Nonetheless, the savings on your electricity bill over time may offset the maintenance costs.

For those who lack the liquidity to purchase a solar system outright, renting may be a more viable option. Renting a solar system involves monthly rental fees, which may increase over time due to inflation. Although renting may be less expensive in the short term, the total cost of ownership over the system’s life may be higher than buying one outright. Renting may also come with restrictions on the size and type of solar system that can be installed, which may limit your energy production and savings potential.

Some solar system installers offer rent-to-own packages, which can be a great option for those who want to own a system but can’t afford the upfront costs. With rent-to-own, you’ll be renting the system for a fixed term, but over that time, you’ll also be paying off a portion of the capital and interest to the seller. At the end of the term, you’ll own the system and be responsible for its maintenance. This option is similar to financing an installation through your bank, and the only additional cost would be the interest payable over the term of the contract. However, financing costs will be spread over the term of the agreement and may increase the overall cost of the installation.

Let’s take a closer look at the financial implications of buying versus renting a solar installation for a household with monthly expenses of R50 000, including residual electrical expenses through Eskom and an investment portfolio of R10 million. In this scenario, we assume that expenses increase at an inflation rate of 6% and that there is an investment return of inflation plus 4% per annum on investments. We also consider the cost of maintaining the solar installation.

For a purchased installation with a cost of R180 000 once-off, replacements would be required for the inverter every 10 years (R40 000), panels every 20 years (R23 000) and batteries every 10 years (R50 000). On the other hand, a rented installation with a monthly rental cost of R4 000 increasing at 6% per annum (inflation) would have an installation cost of R4 000 (first month’s rental) and a removal cost of R30 000 assumed at the end of the client’s life increasing at inflation.

Our scenario found that renting is a better option for the first five years, after which buying the solar installation becomes more financially beneficial. A purchaser would have 5% more remaining investment capital than a renter after 10 years, 13% more after 15 years, and a significant 75% more after 20 years. This is because the cost of renting increases with inflation while the investment capital is reducing.

It’s important to note that buying a solar installation is a good long-term investment for households with sufficient liquid investments. However, renting may be a better option for those who cannot afford the upfront cost or those who plan to move within five years. When making a decision, it’s crucial to consider the maintenance costs and evaluate the expected savings against the initial investment to determine which option is best for your household.

To determine which option is best for your unique financial situation, please consult with your financial planning specialist. They can help you understand the total cost of ownership of both options, including upfront costs, ongoing maintenance costs and energy savings potential. By evaluating your long-term financial goals, they can assist you in making an informed decision that is tailored to your needs.

I’ve had the incredible opportunity to witness how men and women bring their own unique perspectives to the realm of financial planning in my years as a financial planning specialist. These observations have unveiled intriguing trends that shape our understanding, says Tiffany Havinga, Financial Planning Specialist at Chartered Wealth Solutions.

Putting family and self first

A recurring theme that has caught my attention is the way women often prioritise their families’ financial needs above their own. This inclination, born out of genuine care, can sometimes lead to neglecting their personal financial well-being. It’s akin to the flight safety advice: secure your own oxygen mask before assisting others. In the world of financial planning, this wisdom rings true – strengthening your own financial foundation is crucial before extending a helping hand to others. Just as ensuring your own safety equips you for effective caregiving, focusing on your financial security provides the stability and resources to meet your family’s aspirations. This comparison highlights the essential role of self-preservation in financial planning, allowing you not just to look after your loved ones, but also to empower them to look after themselves.

Embracing life planning

Another notable observation centres on how women wholeheartedly embrace ‘life planning’, intricately weaving their financial decisions with their personal dreams. Women, I’ve noticed, bring a unique resonance to life planning. They approach it with an attentive perspective, carefully assessing the early stages of discussions. This tendency might come from the careful thought they’ve put into planning their upcoming life stages. I also find that women are aware of (and quite realistic about) the impact that significant life transitions may have. This perspective allows them to tackle challenges head-on because they are not caught entirely unaware.

A new dialogue about money

Excitingly, the conversations surrounding money are shifting. Women are taking the reins, venturing beyond mere numbers and intertwining money with life goals.

Please contact your financial planning specialist if you have any questions.