A parent’s guide to saving up for Children’s Education

As a parent, one of your goals is probably to set aside money for your kid's education. When you give your children quality education your give them a strong foundation.

However, the cost of education here in South Africa is getting higher and higher over time. Then again, nothing can ever replace the cost of missing out on education and its implications on your child's life.

According to a research by Liberty Group Limited, the approximate total cost of education for a new-born child is estimated at R2,023,000 for private schooling and R701,000 for public schooling. This excludes extra costs such as uniforms, textbooks, stationery, transport, extramural activities, and accommodation.

My head is spinning. Those are staggering numbers.  

The sooner the better.

If your child is just a twinkle in your eye or if they have already started school, it’s never too late to start planning and saving and the best time is right now. At the end, time will always be your greatest asset and this will also take the pressure off you in the years ahead. 

Errol Meyer, Legal Specialist at Standard Bank Financial Consultancy says education inflation tends to outstrip consumer inflation by between 2% and 4%, depending on the year.  Then there is also the fact that most parents will have more than one child. 

Meyer says an ideal way to save for your child’s education is a tax-free investment vehicle, which allows you put away up to R33,000 a year that you can cash out at the end of your particular time horizon without incurring any tax.

“Rather than chasing high returns, define how much you will need over the investment horizon and then invest in a product that offers a return profile that will achieve that defined goal,” he says. “If you can reach your goal with an `inflation-plus-five-percent’ strategy then rather go with that than expose your child’s future to greater risk by chasing a more aggressive return profile.”

Another valuable piece of advice from Meyer is to save in the currency in which you intend paying fees. If you are planning to send your child to university in the UK then look for a British investment product denominated in pounds. If you want to send your child to study in the US then look for a dollar-based investment strategy.

“Different countries have different economic growth rates, interest rates, inflation, and political regimes which can all affect their currencies,” says Meyer. “The rand is also a notoriously volatile currency so it’s quite risky to save inrand if you intend educating your child abroad as there is a fairly good chance that the rand could move against you.”

Meyer’s final bit of advice is to educate your children about the value of money and instill in them a sense of responsibility. As you teach them about educational or sporting goals, also help them set financial goals and enable them to achieve them.  At the end of the day, it helps both you and your children if they know what they are saving for and how they can help achieve it.

“What is the point in having the money and the child has no appreciation for the effort?” says Meyer. “Teach your children financial skills and instilling a sense of responsibility in them will go a long way towards giving them the best chance of making a success of their lives.”

Parents, I’m interested to hear what your thoughts are.