Financial planning through pregnancy
Medical aid membership: It is important to ensure that you are a member of a registered South African medical aid before falling pregnant. Remember, applying for membership when you are already pregnant is likely to result in a 12-month condition-specific waiting period being imposed meaning that you will not have cover leading up to the birth nor for the delivery itself. When choosing an appropriate plan option, determine to what extent your medical aid will cover regular visits to your Obstetrician, including ultra-sounds and blood tests. Further, ensure that the maternity hospital you have chosen falls within your medical scheme’s network of hospitals, and determine how long your medical aid will cover you for in-hospital stay after the birth of your child. If possible, obtain a quote from your Obstetrician for the birth of your child, whether by C-section or normal birth, and check with your medical scheme that these costs will be covered. Other hidden expenses may include the costs of a mid-wife or doula, post-birth check-ups, or medical costs that could arise as a result of complications.
Gap cover: Gap cover is essentially short-term cover that funds the difference between what specialists charge for in-hospital treatment and care, and what is paid by the medical aid. Many Obstetricians, Paediatricians and other specialists charge in excess of medical aid tariffs and, in the absence of a gap cover policy, this difference will be for your pocket. There are a number of gap cover providers in South Africa that offer varying levels of cover, with premiums ranging between around R400 and R600 per month. However, bear in mind that most gap cover providers will apply a maternity waiting period of between 10 and 12 months, so be proactive about finding a suitable gap cover policy.
Plan your maternity leave: By law, all employers in South Africa must provide female employees with four consecutive months of maternity leave although they are not obliged to pay you during this time. You are entitled to take your maternity leave from four weeks before the due date and are not required to return to work within six weeks of the delivery date. Remember, the onus is on the employer to put plans in place for your workload to be managed in your absence. Check the terms of your employment contract to ensure exactly what you are entitled to in terms of additional leave and pay. If you have been contributing to UIF, you will be able to claim between 30% and 60% of your income during your maternity leave. However, first prize is to reach an agreement with your employer in respect of your maternity benefits. Most employers want to act in the best interests of their employees, so schedule time with your employer to discuss your needs with a view to negotiating some form of income during your leave period, while also ensuring no interruption in your pension fund and medical aid contributions.
Additional savings: Once you have clarity with regard to your maternity leave and pay, you will be able to calculate your financial shortfalls and plan accordingly. Start as soon as you can to build up a savings account earmarked specifically to cover the shortfall in your budget. Together with your partner, prepare a realistic post-baby budget that covers your maternity leave period, and then work out the shortfall that exists. Put money aside each month to ensure that by the time baby comes you have built up a reserve fund to tide you over. You’ll also want to set money aside to cover baby-related expenses such as nursery preparation, prams, car seats, and other accessories. There are so many hidden costs associated with having children, and your future self will thank you for setting this money aside. Having said this, avoid falling into the trap of buying every possible gadget for your new baby. Speak to other young parents and do your research online before buying baby gear.
Post-birth financial planning
UIF: If you are on maternity leave, you are able to claim unemployment insurance from the UIF provided that you contributed to the fund for a period of more than four months prior to going on leave. To qualify for the benefits, your employer must be paying you less than your normal earnings while on maternity leave. Depending on your level of income, you may qualify for benefits between 38% and 58% of your income, up to certain maximums, for a period of 121 days. Once you begin your official maternity leave, you can submit your UIF claim although you will only receive your first payment once you have submitted your child’s birth certificate, keeping in mind that you must apply within six months of your child’s birth.
Medical aid dependant: Ensure that you add your new baby as a dependant on your medical scheme to ensure that she is covered. Your healthcare advisor should be able to assist you with this process bearing in mind that most medical aids require that you register your child within 90 days of his/her birth or adoption. Healthcare expenses in the first year of a child’s life can be enormous so you need to ensure that you have selected the most appropriate plan option for you and your family.
Update your will: With a new dependant, you will want to update your will accordingly and nominate guardians for your minor child in the event that you are no longer around. If you have assets that intend bequeathing to your minor child, consider setting up a testamentary trust in your will to ensure that those assets will be protected and administered in their best interests until they are old enough to manage their own affairs.
Amend your life cover: Together with your financial adviser, you will need to reassess the quantum of life cover. Should you pass away, you will no doubt want to make provision for your child and one of the easiest ways to do this is by increasing your life cover accordingly. Remember to ensure that any life policies you have in place are correctly structured to achieve their intended purposes and that the correct beneficiaries are nominated. If you intend bequeathing assets to your minor children via a testamentary trust, keep in mind that you will need to nominate the trust as a beneficiary to the life policy.
Save for her education: Start saving as soon as you can for your child’s tertiary education as this will give you at least an 18-year investment horizon to work with. Given this horizon, you will be in a position to invest in a growth-targeted unit trust portfolio so as to take advantage of long-term market returns.
Have a super day.
Sue
