For Families

Life Cover

Life cover is the most widely held financial product in South Africa, and the most widely underestimated. Most people have some life cover. Very few have enough.

The correct framework for calculating the right amount is not a salary multiple — it is a needs analysis. What would your family need to maintain its lifestyle if your income disappeared permanently?

For a family with a R2 million bond, two children, and a spouse who earns less than the primary breadwinner, a life cover amount of R5 million to R8 million is often appropriate — materially more than the one or two times salary that employer group cover typically provides. Have this reviewed by an adviser using your actual numbers, not an online calculator that doesn’t know your liabilities.

Medical Aid & Gap Cover

Medical aid becomes more complex and more consequential when children enter the picture. Three things to address with your current plan:

• Are all dependants registered? Children must be registered as dependants — an oversight here means a claim can be declined.
• Is your plan designed for a family’s actual usage? Hospital plans with no day-to-day benefits work for healthy single adults. Families with young children typically use out-of-hospital benefits — GP visits, paediatric consultations, acute medication, dentistry — far more than hospital admission. A plan that doesn’t cover these creates a predictable monthly out-of-pocket cost that erodes the household budget.
• Do you have gap cover? Medical aid does not cover the full cost of specialist treatment at private hospitals. The shortfall between what the specialist charges and what medical aid pays is known as the gap. Gap cover insurance is inexpensive relative to the risk and settles this shortfall directly. Without it, a hospitalisation event can leave a family with a R30,000 to R100,000 bill after medical aid has paid its share.

Education Planning

Education inflation in South Africa has averaged 9–10% per year for the past decade. The implication is straightforward: education is an investment with a known cost and a known timeline. The sooner you start, the more of that cost is funded by investment returns rather than contributions.

School fees are a near-term budgeting decision — choose a school within your means and treat it as a fixed monthly cost. University is the longer-term problem, and it’s the one worth actively investing for, because the numbers below get worse the longer you wait.

Worth factoring in: fewer children today are financially independent at 18. Between longer periods of study, competitive graduate job markets, and the cost of establishing an independent household, many parents find their financial support extends well into a child’s twenties — which makes it worth planning for a fund that lasts longer than the school years alone.

The Tax-Free Savings Account, opened in your child’s own name, is the cleanest vehicle for education savings: no tax on growth, no restrictions on use, fully flexible. R46,000 per year, R500,000 lifetime limit. Once you’re comfortable with the amount built up there, further contributions can move into a discretionary unit trust instead — growth in a unit trust is subject to capital gains tax on withdrawal, so the trade-off is worth weighing against how much of your child’s own future TFSA capacity you want to use now. An adviser can help you find the right balance.

Wills & Guardianship

A Will is always important. For parents of minor children, it is not optional.

Without a Will, there is no legal mechanism to name a guardian for your children. The courts determine guardianship — applying their own assessment of the best interest of the child, without knowing your wishes. This process can be contested, protracted, and deeply distressing for an already grieving family.

A Will allows you to:

• Name a guardian explicitly for your minor children — the only document that can do this.
• Establish a testamentary trust to hold your children’s inherited assets until they reach an age you specify — preventing a significant inheritance from landing with an 18-year-old who lacks the maturity to manage it.
• Name a trusted executor to wind up your estate efficiently, rather than leaving that responsibility to the Master of the High Court.

If you have children and do not have a valid Will, drafting one is the single most important financial task on this list.

Income Protection

For a family, income protection is not personal — it is structural. If the primary earner loses their income due to illness or injury for six months, a year, or longer, the family’s entire financial position is at risk: the bond, the school fees, the medical aid, the retirement contributions. Life cover doesn’t help here. Disability cover may not be triggered. Income protection — a monthly benefit paid for the duration of the incapacity — is the only product designed specifically for this scenario.

The most important thing to understand about income protection for parents is that the appropriate benefit amount is higher than for a childless professional. The obligations are higher — school fees, additional dependants, potentially a bond — and the margin between income and essential expenses is often thinner.

Review your benefit level alongside your life cover, not separately from it.

The New Parent Checklist

Most of what’s covered above happens gradually, over years. But there is a short list of things worth actioning in the first few months after a child arrives — before life gets busier and the list gets forgotten.

Tick off what you’ve already done. For anything still unchecked, feel free to come speak to us.

• Add your child to your medical aid as a dependant Most schemes require this within a set window of the birth — often 30 days — to avoid late-joiner penalties or gaps in cover. Do this first.
• Confirm your gap cover extends to your child Gap cover policies don’t always update automatically when a dependant is added to medical aid. Confirm the child is covered, not just registered.
• Increase or take out life cover A dependant changes the maths behind every life cover calculation. If cover was set before children, it is very likely now insufficient.
• Make sure you have income protection If you don’t already have this in place, a new dependant is the moment to get it. Your income just became someone else’s lifeline.
• Draft or update your Will and name a guardian This is the only document that can name who raises your child if you are not able to. Do not leave it to the courts.
• Review beneficiary nominations on all policies and retirement funds Beneficiary forms are often years out of date. Confirm they reflect your current family, not a previous life stage.
• Open a TFSA in your child’s own name for education savings The earlier this starts, the more of the eventual education cost is funded by growth rather than contributions. See the Education Planning section above.

None of these items are individually complicated. Collectively, they are the difference between a family that is protected and one that assumes it is.