How to save for your child’s education@Model.headingtag)>
Posted on 2017-08-30
According to a child education cost survey run by City Press in 2016, sending your child to a model C school from grade R to grade 12, including stationery and uniforms, will cost you approximately R676,306. For a private school, it’s over R3 million. The survey revealed that if your bright young learner then wants to go on to tertiary education, like a three-year BA degree, it’s going to set you back between R190,000 and R472,000.
So whether you're about to start a family, or are currently raising small children, it’s never too early to start planning. And with the South African Institute of Race Relations reporting in 2015 that only 5% of South African families can afford to send their children to university, it’s time start thinking about the best child education fund for you and your kids.
Best way to save for your child’s education
Every family’s financial situation is different, so draw up a budget and see how much you can afford to set aside on a monthly basis, or how much you can deposit in an investment. Are you sending your child to a private school? How much are you expecting to spend on extra murals and activities?
The amount of time you have available is another factor to consider. The considerations are different for a newborn and a 10-year-old, for example.
Once you have a clear idea of how much you can save, think about how you can grow that saving year on year.
Grow your savings
Use your salary increase each year to boost savings. If you get a 7% increase, for example, then set up a debit order for a percentage of that to go directly into a savings account.
Every year commit to upping that percentage. Within five years aim to have 10% of your salary going straight to savings.
Start a child education fund
It’s in every parent’s interest to start a child education account. Ask family members to add money to this fund for birthdays, Christmas or special occasions.
Investment options for children’s education
If you have a good five to 10 years before you’ll need the money, invest in a fund that will grow faster than the increases in school fees. School fees increase approximately 10% annually, so chat to your financial advisor about options.
Get your child to pitch in
Once your child starts earning money babysitting, or gets their first job waitering or tutoring, they can start putting money towards their college fees.
It’s not always possible, but if you can teach your teenager to split their wages into three parts – short-term expenses, long-term goals and long-term expenses – this will not only help with fees, but also teach budgeting skills that they will help them throughout their lives.
The majority of students may have to rely on study loans. Borrowing money to study is one of the ‘good’ debts, because it delivers return on investment, but even good debt can become bad if not managed correctly.
Parents can help by paying the interest portion of the loan. Students can work part-time to help repay the loan or borrow less and study part-time. Accumulating debt will hold them back from building wealth once they start working.
The information contained in this article is for informational purposes only and does not constitute professional advice.