/ 29 November 2010

A gift that will keep on giving

This festive season you should think about a long-lasting gift for your child, says Anil Jugmohan, investment analyst at Nedgroup Investments.

A recently published festive-season spending survey by Deloitte shows that 62% of South African shoppers intend to spend the same or less than they did last year over the holiday season, while 78% say they won’t buy on impulse. If you’re choosing gifts more carefully this year, rather allocate a portion of your spending money to a savings or investment fund for your child’s education.

One option is to invest through Fundisa, a joint initiative between the government and the unit trust industry. It incentivises you to save for your child’s tertiary education by supplementing your contributions with additional funds. For every R4 you contribute, the government and the unit trust industry will contribute an additional R1. This is limited to a maximum of R600 per child per year, though. Still, you can put as much into the fund as you wish because it earns good interest.

Jugmohan says other savings vehicles to consider are unit trusts, endowment policies and trust funds.

“Unit trusts are collective funds which allow investors to pool their money into a single vehicle that may include various asset classes. This spreads their risk, and will also allow parents the benefit of professional fund management,” he says.

An endowment policy works well for people who need more discipline to save for their kids’ education. But be aware that these policies are inherently inflexible and may cost you a little more.

The beauty of these gifts is that they’ll last long after the gift wrap’s torn and the turkey’s eaten — and you can’t say that about too many gifts these days.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information.