One of the greatest responsibilities and privileges of being a parent is to provide a great education for our children. Among parents’ main concerns today are: how will I afford it; and, what if I die before I have a chance to safeguard my child’s future?
Madiba said education is “the most powerful weapon you can use to change the world”. Malcolm X called it “our passport to the future”. More than reading, writing and maths, education and a legacy of learning form the path to a better life, making it one of the most important investments a family can make. Education gives people critical skills and tools to help them better provide for themselves and their children; it helps people create opportunities for sustainable economic growth; and it helps fight the spread of diseases and improves overall health – for individuals and for nations.
“People are increasingly recognising the importance of a good education and are also aware of its escalating costs,” says Discovery Financial adviser Claire van Wyk. A child born in 2015 will start high school in 2029 at a cost per year of around R100 000 (public school) or R300 000 (private school).
“Generally education inflation moves at about 3% a year above inflation. The net effect of this is that the cost of education is increasing faster than our salaries,” says Van Wyk. “Add to that the increasing importance of staying globally relevant, which means many parents today want to have the option to educate their children overseas.” An international tertiary education currently costs around R250 000 a year.
Here we provide 5 ways to save for your child’s education:
1. Start from birth
In the six years until your child enters Grade R, you can build a sizeable education fund if you start saving when your child is born.
2. Focus on varsity
There are some excellent government primary and high schools in most provinces – these cost around R30 000 annually, manageable compared with the R500k+ you are likely to need to cough up for a degree.
3. Savings plan for education
With the help of an accredited financial adviser, you can decide on an investment product that best helps you achieve your investment goals. There are various investment vehicles to choose from. The one that is best for you will depend on factors such as the intended term of your investment and your overall tax situation. An endowment is a tax-efficient investment product for anyone saving over the medium to long term, such as saving for your child’s education. It’s important to note that with an endowment you would typically have limited access to your investment during the first five years (as per regulation).
4. Investment options
“Saving needs not be restricted to a bank account. In fact, most savings in a bank account are not going to keep up with inflation,” says van Wyk. “For your longer-term goals, you need to take the appropriate risk to deliver long-term inflation-beating returns.” Speak to a financial adviser who can assess your needs and offer customized options.
5. A Gift that keeps growing
Share the deposit details of your chosen fund with family members when they ask what they can buy your child for birthdays and celebrations. A contribution to their education makes a far more meaningful long-term gift for a child than a toy or item of clothing.
What about when you’re no longer around?
To prevent unforeseen events (illness, disability or death) robbing you of the legacy you want to leave your child – it’s wise to plan in a way that ensures your children will continue to get the benefits.
Consider a plan such as Discovery’s Global Education Protector, which ensures that the costs of education are covered locally from pre-primary to tertiary level at all recognised institutions. You also have the option of an international degree through Discovery’s global network of universities, including Harvard, Cambridge, Oxford and Yale.
Discovery Life is South Africa’s number one life insurer and offers a wide range of life insurance products to suit your needs. Your financial adviser is there to help explain the options that are available to you and ultimately recommend which of them best suit your personal circumstances. To find out more about our life insurance products or to get in touch with a Discovery financial adviser, visit www.discovery.co.za.
Contact 011 529 0091 for more information or ask your broker about Discovery’s Global Education Protector.
Please note that the figures in the article are based on projected values and therefore cannot be assumed.
