A recently published festive season spending survey by Deloitte showed that 62% of South African shoppers indicated they would spend the same or less than they did last year over the holiday season, while 78% said they would not buy on impulse.
According to Anil Jugmohan, Investment Analyst at Nedgroup Investments, with parents choosing their gifts more carefully in the current economic climate, one of the best presents one can offer their child is the opportunity for a good education.
"By allocating a portion of your holiday and festive season spending money to a savings or investment fund for your child's education, parents are offering one of the most valuable gifts there is to give. It shows your children that you care enough about them to invest in their future."
Jugmohan says parents should consider all the various saving options that are available to them. One way to invest in education this festive season is through Fundisa - a joint initiative between Government and the unit trust industry. It aims to encourage and incentivise individuals to save for children's tertiary education by supplementing your contributions with additional funds.
"By investing relatively small monthly payments - the amount it would cost to buy a small gift for example - the Fundisa fund can accumulate an attractive lump sum by the time the child is ready for university," he says.
For every R4 that you contribute to the fund the government and unit trust industry will contribute an additional R1. This additional contribution is limited, however, to a maximum of R600 per child per year, but investors are encouraged to put as much into the fund as they wish since it earns very competitive rates of interest. The government bonus also earns interest as well, explains Jugmohan.
"This becomes a very significant contribution in the long-term and is one of the reasons that we support this initiative," says Jugmohan.
Other savings vehicles that Jugmohan says that many parents consider are unit trusts, endowment policies and trust funds.
"Unit trusts are collective funds which allow investors to pool their money into a single vehicle that may include various asset classes. This spreads their risk, and will also allow parents the benefit of professional fund management" says Jugmohan.
According to Jugmohan, an Endowment Policy may work well for people who need more discipline when saving for their children's education. The downside to these products are the inherent inflexibility and higher costs though.
The popular saying, ‘knowledge is power' is especially true in Africa. Education is one of the most significant avenues through which childhood aspirations can be realised. "While saving for your child's education may be the primary goal huge satisfaction comes from watching them reap the benefits that a college or university degree offers," says Jugmohan