Financial Planning

The role of beneficiary funds in preparing young adults for financial independence

By Advocate Sankie Morata CFP®, CEO of Sanlam Trust

Financial Literacy Month, marked in April this year, provides an opportunity to consider a growing and often underestimated risk factor in beneficiary funds: What happens when a protected minor becomes a financially independent adult?

Beneficiary funds safeguard death benefits for minor dependants, ensuring structured financial support during a child’s most vulnerable years. In many cases, they act as a financial safety net, stepping in where a parent no longer can.
However, the real test of their success lies beyond childhood. Beneficiaries should in fact be equipped to manage their finances when they reach adulthood and receive their final payout.

Securing more than a legacy

Advocate Sankie Morata CFP®, CEO of Sanlam Trust, says that beneficiary funds should also ensure that beneficiaries are equipped with the knowledge, skills and confidence to manage their finances as they mature into adulthood.

This transition, when beneficiaries receive their final payout or assume control of their funds, represents one of the biggest risk moments in the beneficiary life cycle. Without adequate preparation, beneficiaries may face challenges in managing their lump sum payouts, increasing the risk of rapid depletion of the funds, financial pressures and demands from extended family, and long-term financial instability.

Allocating death benefits is about more than preserving capital – it’s about securing the long-term well-being of dependants. It’s not only about compliance, it’s about the outcome for each beneficiary.

‘Financial literacy should be part of how beneficiary funds are designed from the start, not something added on later,’ Morata explains. ‘If we don’t actively prepare young people to manage their money, we risk defeating the very purpose of the benefits meant to support them.’

Financial education should not be a once-off intervention introduced shortly before payout. It should start much earlier, and evolve as the child matures. Early-stage support may focus on basic financial awareness, often through guardians or caregivers. As beneficiaries approach adulthood, this should transition into more practical guidance around budgeting, saving, investment and managing larger sums of money.

This is particularly important in the South African context, where many beneficiaries are raised in environments with limited access to formal financial education. Socio-economic pressures, complex family structures and competing financial demands can further increase vulnerability when a lump sum is received.

Ultimately, the success of a beneficiary fund should not be measured solely by how well it protects assets, but by how effectively it prepares beneficiaries for what lies beyond the fund lifespan. Even the best-managed benefit falls short if it doesn’t help a young person build a financially secure future.

Talk to your Sanlam adviser about how a beneficiary fund can assist your loved ones should this be necessary.

Learn more about beneficiary care