Consider giving education this festive season

By Staff Writer
With the December holidays edging closer, most people are already thinking about what to buy their loved ones. However, with consumers still keeping a close rein on their purse strings, this festive season is a good opportunity for South Africans to consider longer lasting gifts for their children.

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

Recent Articles

Featured Request your credit report from the right bureau

With so many different credit bureaus in South Africa, it may be difficult to decide from which one to request your credit report. We have a look at what you should be aware of when selecting a credit bureau.

Applying for a home loan? Consider the repo rate

When you apply for a home loan, one of your top priorities should be to secure a low interest rate. In order to achieve this, you need to be familiar with the repo rate. We find out more about this.

Effective financial planning as a single parent

As a single mom or dad, it can be challenging to keep up with the ever-increasing expenses of raising a child. We have a look at the importance of setting up a budget as a single parent.

How your credit score impacts your insurance – and vice versa

Since insurance is paid in advance, it may seem unrelated to your credit score. However, these two are in fact linked to one another. We find out why insurers look at your credit score.

Deals

Get a FREE flight ticket with Hotel Sky

Price: From R5,200
When: Until 31 January 2022
Where: Johannesburg and Cape Town

Voucher for 2 special at Bakwena Day Spa

Price: From R1,798
When: Until 31 January 2022
Where: Centurion, Hartbeespoort and Stellenbosch

Spier Hotel Summer Special

Price: Available on request
When: Until 31 March 2022
Where: Stellenbosch


Latest Guide

Guide to debt rehabilitation solutions