Dec 2014 / Jan 2015

Save for your child’s future

Written by Maselaelo Seshotli
Parents want the best for their children and education is the best way to ensure a child has a successful future.

With some form of tertiary education being compulsory for almost every job, today’s economy favours educated job seekers.

“With the cost of education expected to increase by about nine per cent every year, it is wise for parents to prepare for the future while there is still time,” said Sinenhlanhla Nzama, an investment marketing actuary at Old Mutual.

She said it is important to start saving as soon as possible.

“Whether you are new parents, a single parent or an established family, the key is to start saving early. Life can be very demanding so parents have to be aware of the future cost of quality high school and university education. The later you start saving, the more you will need to save per month.”

By starting to save right away, parents can pace themselves and contribute an affordable amount each month.

Whether you have high school or university tuition in mind for your children the cost of paying for good education increases every year.

Nzama added that the tough reality is that currently, one year’s education could cost between R23 000 and R42 000, depending on the level (primary school, high school, university) and type (private, public) of education. A 2033 forecast could result in a parent spending between R118 600 and R215 500 for one year’s education.

There are a few options to consider when opening an education fund such as the Unit trust, Savings Policies and Fundisa.

People prefer the unit trusts because of it is a long term investment as there are a lot of choices as well as funds that specifically focus on beating the rate of inflation by a certain percentage. This is important because education inflation is higher than normal inflation.

“Unit trust investments are ideal for people who require flexibility and access to the funds, however you must be disciplined and avoid the temptation of dipping into your child’s funds,” added Nzama.

Savings policies are fixed for a certain period of time (for example five to 15 years) depending on when your child will go to school or university.

Parents can either pay fixed monthly premiums or make lump sum payments into the policy.

Fundisa is a government initiative, which allows parents to save towards an accredited qualification at a public college or university.

Parents are paid an annual bonus on the investment, which is about 25 per cent of the save annually, up to a maximum of R600 per child.

“Start [saving] early, even if it’s a small amount each month - it will always go a long way in the future after some investment growth. Speak to your financial adviser who will help you choose the appropriate product and give you advice on how much you should save. This will put you on the right track to securing a good education for your children,” said Nzama.

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