It’s Never Too Soon to Talk to Children About Property

By teaching children the value of money and the benefit of saving for big-ticket items like a car or a home, you will set them up to be financially stable later in life






It’s never too soon to start talking to children about the importance of saving and thinking about their future. "By teaching children the value of money and the benefit of saving for big-ticket items like a car or a home, you will set them up to be financially stable later in life," says Carl Coetzee, CEO of BetterBond. “Financial literacy is an important skill that encompasses everything from understanding compound interest to applying for a bond.”


What is a bond?

While younger children may not be able to understand just how much a home costs, it is important for them to understand that buying a home is a substantial purchase and one that will most likely have to be paid off over a considerable period of time. “A bond is a loan which a bank is willing to give a home buyer to invest in a property. The loan is repaid over a set period of time - usually 20 years - with interest on the amount owed.”

There are plenty of costs associated with buying a home. It is not just the monthly bond repayment. “Buying a home involves legal fees, transfer duties and moving costs,” says Coetzee. “There are also the monthly repair and maintenance costs, as well as rates and taxes. It’s advisable to obtain pre-approval from a bond originator so that you have a clear idea of what you can afford. Pre-approval also improves your chances of securing a bond.”


Affordability is key

When applying for a bond, affordability is always the first and most important consideration. BetterBond offers online calculators that make it possible to work out how much you would be able to afford to pay on a bond each month, based on your income and monthly expenses.

Encourage young adults to consider property as an investment or savings option - it’s not out of reach as they may think, says Coetzee. “If they buy a home in a new development, for example, they will not have to pay transfer duty. Although they will still need to pay transfer costs to the conveyancing attorney, aside from the initial costs, buying in a new development will save money on repairs and maintenance for the first few years.”

Also, if their first home is less than R1.1 million, they will not have to pay transfer duties. Some of the larger banks also offer loans of 100% or more, if buyers meet certain criteria, which will also make it easier to afford a first home. This would make it possible to buy a home without having a deposit. It could also cover the transfer and bond registration fees that need to be paid upfront.


Ask the experts

Most people think you need to apply for a bond through your own bank. But, your children should know that working with a bond originator helps secure the most competitive interest rate. The bond originator will apply to more than one bank on their behalf to secure a lower interest rate, or a rate concession. This means that they could pay less on their monthly bond repayments, and less interest over the bond repayment period. This is a free service offered by the bond originator - the bank that grants the home loan pays the bond originator a once-off fee that does not affect the bond in any way. Talk to them about interest rates when the SA Reserve Bank announces any changes. A change in the repo rate will affect one’s bond repayments.





Be prepared

Young adults need to know that they should consider investing in property as soon as they are financially able to do so. They should set aside money for a deposit so that they pay less each month on their bond and save on interest over the long term.


Rent vs own

Ensure that young adults consider the benefits of owning rather than renting. While renting may suit their lifestyle, having property as an asset is a long-term investment. Also, having a property makes it easier to invest in another property should their lifestyle needs change.

“Homeownership may seem like something only grownups do, but by explaining the basics of buying a home from an early age, you will help lay the foundation that will ensure your children make sound financial decisions when the time comes for them to invest in property,” concludes Coetzee.





back to top