Saving for your child's education is crucial

By Staff Writer

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.

B.Com
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. 

Recent Articles

Featured Register your customary marriage or lose the right to inherit estate

December is that time of the year when we will see at least one suitor sending his uncles to negotiate the price of his future wife. Lobola, as the bride price is known, has always been an important element of the African marriage.

Read more

Changing from one medical scheme to another - effortlessly

It is coming up to the end of the year and you might be looking to change medical schemes, or options within a scheme in preparation for the new year. While you don’t necessarily have to wait for year-end to do so, providers often recommend it.

Read more

Your guide to financially surviving Christmas

There are a few times each year where you need to dig deeper into your pocket and spend more money such as birthdays, anniversaries, and the Christmas period. Whether you celebrate this religious holiday or not, the festive period - depending on how you choose to spend it - means increased travelling, buying of gifts, entertaining, and eating out at restaurants.


Read more

Trump, Trump and a little bit of South Africa

What a November we had, with the rand staging one of its best months and closing below the R14.00 level. To be honest, this looked like quite a far-fetched possibility at one stage during the month. It seems that the tide has changed a little, even though it might be short lived since the US dollar bulls are not so sure of their case anymore.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Free iCollege Scholarship

Price: R600
When: Until 16 May 2019
Where: Nationwide

Telkom December Big Deal

Price: R459 pm
When: Until 31 December
Where: Nationwide

Money Savvy Kids Giveaway

Price: R450
When: 8 December
Where: Johannesburg (Milpark)