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Save for education and push back poverty

By Staff Writer

Inspirational goals drive South Africans to save when all else fails - and no goal for young families is more inspirational than saving for their children's education.

A key ambition of the South African Savings Institute (SASI) for National Savings Month was that the annual awareness-raising initiative will spur parents to think about long-term objectives, especially the need for educational saving.

The Savings Month theme - ‘Save for the Goal: The Path to Recovery' - showcased the role goals have in any savings strategy and that savings can help jump-start a new beginning.

South Africans are united in their desire for a better education for their children, said SASI chief executive officer Elizabeth Lwanga-Nanziri.

She noted that "all families, no matter what the socio-economic group, want the best possible education for their children."

"The state obviously has a role to play as provider of good basic education, but there is broad recognition that the best possible start in life requires family support."

Educational focus prompts families to make an early start on long-term saving - a key SASI objective. Educational saving is also a way of fighting poverty.

Elizabeth Lwanga-Nanziri explains: "Education is vital if we are to break the cycle of poverty."

"Young people with a good education build careers, earn a better income and save for the education of their own children who also develop enough earning power to keep poverty at bay."

"No savings goal could be more inspirational."

Financial service companies offer a wide range of educational savings products, says SASI. Some families prefer to commit initially to a general savings product, establish a cash reserve and then look at specialised medium- and long-term savings products.

When looking at longer timeframes the need to keep abreast of inflation becomes a key issue.

Here, a useful tool is ‘The Rule of 72', a way of estimating doubling and halving times. To find a rough doubling or halving time you simply divide 72 by the relevant figure.

So, assuming inflation stays fixed at perhaps 6%, the value of money halves in 12 years (72 divided by 6 = 12). This indicates that university fees corrected for 6% inflation could be TWICE as high in 12 years' time - a key factor when providing for a child of six that might be ready for university at age 18.

"Inflation complicates the challenge of saving for long-term goals like education," says Elizabeth Lwanga-Nanziri. "The simplest response is to start a savings plan as soon as possible and stick to your plan. Top it up if you can."

Have a savings related question? Justmoney.co.za has a wide range of financial experts to help you out.

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