Beauty becomes more expensive with age, so the best time to start looking after your skin and body is now. Award-winning Personal Finance Journalist and Author of MoneyQuestions? Answered! Maya Fisher-French shares her insight.
Beauty is an expensive business – keeping your nails and hair groomed is a serious line item in your budget, as it is in any woman’s, notes Maya Fisher-French. “Ageing is even more expensive. Your visit to a hairdresser now includes covering grey hairs, and have you seen the price of anti-ageing creams? Then there are options for medical intervention, such as botox and face lifts.”
She affirms that one way to manage these costs is to look after your skin and body and to make healthy choices while you’re still young. “The same applies to other aspects of our health and ageing process. What most 40-year-olds discover is that the choices they made ten years ago are now limiting their retirement options, risk and medical cover,” she adds. She further notes that when you’re in your 20s, it’s hard to imagine what it’ll be like to be 60 years old. “It’s understandable that saving for retirement isn’t a priority. You’re healthy and fit, so medical schemes seem like a rip-off. And you don’t have a family, so life cover seems irrelevant, and the chances of you getting seriously ill are negligible, so why waste money on critical illness cover when you can pay off your car?”
Her empathy goggles on, she reassures that there are far more pressing financial issues facing a 20-something-year-old, “such as building a career, buying a house or car and starting a family, but the reality is that within 15 short years, everything changes and the decisions you make in your 20s and early 30s will harm your finances at 40 significantly.”
Saving for retirement: save later, get less
The sooner you start saving, the less you’ll have to save later and the more money you’ll have, thanks to the miraculous power of compounding interest.
Let’s say Patience and Lydia both invest the same amount but over different periods:
•Patience is a sensible young woman and starts saving R500 a year, which over 20 years totals R10 000.
•On the other hand, Lydia only starts saving ten years later than Patience. Realising she’s a late starter, she doubles her contributions and invests R1 000 a year for ten years, also investing a total of R10 000 over that period.
They’ve both invested the same amount of money, and both receive the same return of 7%, yet after ten years, Lydia’s saved only R14 784 while Patience has turned her R10 000 into R21 933.
By saving less each year but spreading out her investment over a longer term, the effect of compound interest has given Patience a better return than Lydia by a whopping R7 149 – that’s 50% more for the same contribution. That gap widens even further if the investment returns are higher.
What it’ll cost you at 40: You’d have to save 35% of your salary to have the same amount at retirement as if you started saving 15% at 25.
Medical Scheme:
Late-joiner penalties
When you’re young and healthy, medical schemes feel like a complete rip-off as you hardly use them, yet they cost you the equivalent of an overseas plane ticket each year. But when you reach your late 30s and start a family, you realise you need medical protection, except medical cover will cost you more than expected due to your age.
Medical schemes are allowed to charge late-joiner penalties to avoid ‘anti-selection’ – when a person only joins when they know they’re ill. A late joiner is someone who applies for membership who’s 35 years of age or older and hasn’t been a regular member of a medical scheme. If you have a pre-existing condition, such as a back problem diagnosed before you joined the medical scheme, the Medical Schemes Act allows for a general waiting period of up to three months to apply and a condition-specific waiting period of up to 12 months, during which you can’t claim any expenses incurred for your back injury.
What it’ll cost you at 40:
If you’re 40 and haven’t been a member of a medical aid scheme for four consecutive years in the last 12 years since 1 April 2001, you’ll pay an additional 0.5% on your premiums. That equates to an extra R100 per month on a R2 000 medical scheme contribution or R1 200 yearly. As medical premiums increase by around 9% a year, your penalty premium increases by the same amount. Over the next 20 years, you’ll pay R61 000 in additional penalty premiums.
Risk cover:
Age comes quickly
Life cover premiums become more expensive should your health deteriorate, meaning it’ll be unaffordable when you need it most. The benefit of getting risk cover when you’re still young is ensuring you have sufficient insurance for the rest of your life. As you age, you risk having specific exclusions applied if you’ve had health issues and have a higher chance of developing health issues. A 25-year-old today will, in 15 years, no longer be considered ‘young’. And for a good reason. Ask around your office or community how many people in their 40s have back or knee injuries or have developed a mild but chronic illness. Back strain, for example, is a fairly common complaint, yet it can significantly increase your risk premiums or even result in any back-related disability being excluded from your policy.
What it’ll cost you at 40:
Life cover of R1 million for a female aged 30 can increase by as much as 70% by the time she’s 40.
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