Financial planning makes provision for various happenings, such as retirement, disability, medical cover etc. One of the more important, but neglected provisions is the financial planning of studies for your children.
Anybody that is currently paying for their children's tertiary education, or has already paid for it, will agree that the rise in educational costs is much higher than normal inflation.
Let's take a look at the average costs of a third year B.Com student at the University of Stellenbosch. Variable costs such as meals and pocket money can vary from student to student and will depend on whether your child will be staying home while studying and other variables.
Course fees R29 580-00
Hostel fees R19 895-00
Meals R13 900-00
Allowance R12 000-00
TOTAAL R75 375-00
Parents must make provision for a lump sum of R 75 373-00x 3 = R226 125- 00 in today's money terms in order to be able to educate their children. This means if a baby is born today; over an 18 year period his/ her parents will have to save R 1046-88 per month, taking into account the yearly inflation rate to make enough provision for a three year B.Com degree at a University. The table below indicates the later you start saving, the higher the savings per month will be.
Age of the Child Monthly Amount required Saving time period
Birth R1 046-88 18 years
3 Years R1 256-25 15 years
5 Year old R 1 449-52 13 years
8 Year old R 1 884-38 10 years
10 Year old R 2 355-47 8 years
Very few households are in the position nowadays to be able to save these amounts of money per month. Parents must be aware of the facts and if possible try and save at least a portion of the funds needed.
The longer you wait, the worse the situation will become. Parents must also make sure that their savings are saved within the right product.
A Financial planner should be able to pay attention to the asset allocation which is necessary for each saving and should be able to advise the client accordingly. The better the saving plans return, the smaller the amount that needs to be saved on a monthly basis.
The days are gone where a parent contributed towards a policy for their children over an 18 year period, to find out later that the return will only cover the first term fees. Ongoing planning for studies is nowadays a given and can be an advantage to parents and their children.
For those who are not in the position to save R1046.88 a month, alternative opportunities must be looked at. Your financial advisor can however provide you with the relative guidance and advice.
The conclusion is thus: make sure that you receive the correct advice on an ongoing basis and save what you can. The sooner you start, the better.
Alternatively, there are student loan options but these will leave you and your budding young professional with a mountain of debt before their time in the 'real world' has even started.