Are you money savvy?
Have you considered a life policy? Are you making provisions for retirement? Are you prepared to handle a crisis? Kgomotso Masongoa, financial advisor at Discovery, gives tips on becoming a financial fundi.
Please share about your journey and work experience?
I was born in and grew up in Alexandra. When I finished matric I wanted to be a chartered accountant so I did my first year at the then Midrand Campus but my parents couldn’t continue paying my fees so I had to find a full-time job.
That’s when I got introduced to the insurance industry. Starting in the call centre, I then did personal financial planning for a couple of years. I got experience into the pension funds servicing, then I got into the commercial spectrum. And I also did a bit of corporate financial planning. Throughout my employment journey I studied part-time – I started with my certificate of proficiency and then I did my wealth management certificate. I also did my post graduate diploma in administration. I graduated in 2011 and by January I am looking to do my CFP with the University of the Free State. I have been in the industry for about 15 years now.
What duties does your current role encompass?
I am a financial planner for individuals, aimed at families and couples. But I also look at companies – we offer group risk, disability benefits and short-term insurance. I cover the personal side of insurance for individuals, third-party for companies and medical aid schemes.
What is the one thing you learnt about money at a young age that has held you in good stead?
You must save before you spend. With my upbringing, I was exposed to buying food on credit. But as I grew up and got to open my eyes, I realised that if only I had an investment then in five years’ time at least I would have an endowment that would have matured. Unfortunately because I didn’t have good advice, once I started working I opened a Truworths account.
Later on, once I got to realise the interest that I am paying – it doesn’t make sense.
What is the one thing you learnt when you were older that you wish you had learnt earlier?
People only realise the importance of a life cover once there has been the death of a breadwinner. They could have had a policy to pay out.
Disability – you say to young people: “Let’s talk about disability.” “No, Kgomotso, I am too young. Let’s talk about it when I am 35 or 40.” They are driving a financed car which is comprehensively insured – if they have an accident, they will get a brand new car but what happens to them if they become disabled? They get into trouble because they don’t have enough money.
Retirement – young people don’t realise the importance of compound interest. Government has to take care of pensioners – people that either didn’t take care of their finances or people who, instead of saving their retirement monies whenever they changed jobs, kept on withdrawing it. Currently, government is working on a retirement reform, finding ways to make it compulsory for individuals to save for retirement during their working life. Hopefully, we will have a bit of a savings culture developing because currently people are still swamped in debt.
Risk planning is extremely important. Chronic illnesses need a lot of money. It’s not only about the medical aid being able to cover some of your medication, or you being hospitalised, but some of the critical supplements you need to take are actually not covered.
Sadly women seem to be the least prepared when it comes to finances, often leaving those matters to husbands or fathers and constantly being caught unawares – what financial advice would you give to them?
Women are not always geared up for life-changing events. There are working women who get into relationships, get married and then conveniently become housewives. But by the same token, they may be receiving allowances but not thinking of saving for their retirement. The next thing, the husband has a mistress, they get a divorce and then what happens? So it’s important for you to look at financial planning for you as a woman, irrespective of your circumstances.
In marriage, you also look to things like education planning for the children or retirement planning for yourself.
Women need to take care of themselves. If there is any extra money, make sure you have policies up and running, your risk policies and importantly, retirement savings.
If you are not looking after your finances or making provision for it, you might not be able to take care of yourself and end up with the minimal government pension.
What is the healthiest thing one can do for their finances?
Save before spending. Stick to your budget and try stay away from unnecessary debt. Don’t buy on credit. Although with credit cards there is a certain period of time with lee-way of not having to pay the interest. But it is important to use it only in times of emergencies.
In most cases, people never read the fine print when they take out life or insurance policies – it what way can this be detrimental?
It is important to find an accredited advisor, someone with integrity who is trustworthy. These days everything is so regulated and transparent, but when you are not happy about something you can ask for a second opinion. Do research – consumers need to be getting into the culture of reading.
In the current economic climate people hardly have money to save or pay for policies – what practical advice would you give people in these kinds of situations?
It is important for people to realise that they need to take a life insurance policy as an absolute necessity. It’s interesting to see a client’s priorities – some say they cannot afford a life insurance policy of R500 yet they have the full bouquet of DStv.
Different between provident and pension?
With a pension fund, a member gets immediate pension benefits – the contributions are deducted before the tax is calculated. On a provident fund, the contributions are made after the tax is calculated so the member gets to benefit from the tax at a later stage.
What would you recommend people (laymen) read to educate themselves on financial affairs?
Learn to budget as it gives guidance on your monthly savings and expenditure. Read Personal Finance in the Saturday Star or online. There are some DStv or TopTV channels on finance or even on the radio, or read magazines and newspapers such as Business Day.
Do you think we are doing enough to teach young people who are still in high school to manage their money better?
I don’t think it’s enough. There have to be specific subjects where we talk about monies. Find ways to help kids know that education is important, but try also be entrepreneurial in terms of thinking. Get them to work for their money.
Do you think it should be made compulsory for people to have insurance?
It’s important for people to realise the need for having insurance. For instance, car insurance on a financed vehicle: if you cancel that insurance and you are involved in an accident, you will carry on paying without even driving that car. If there is a fire in your home and you don’t have insurance and you lose your home, sadly it’s gone.
With life insurance policies – the young ones who are left behind are the ones who really suffer because now they are destitute.