Students doing a science experiment at the University of Johannesburg. Picture: Ziphozonke Lushaba

With the cost of education increasing each year and a scramble for space at tertiary institutions, it is essential for parents to ensure that they plan adequately for their children’s future.

Wikus Jordaan, risk product manager at Liberty Corporate, said the recent rush by many students to ensure they have a place on their preferred courses after getting the results for their 2011 National Senior Certificate has highlighted the hunger for tertiary education among the newly matriculated.

Jordaan said that for many the high education cost can be a huge barrier to gaining entry to tertiary education institutions.

He said a study by Moneyweb earlier this month found that the average cost of the first year of study for an undergraduate degree across seven SA universities ranged from R24 845 to R31 759, depending on the nature of the degree.

“A university degree is widely recognised as a solid stepping stone on a chosen career path. However, the reality is that this is a huge cost to outlay for one year of study.

“Putting enough money away to fund your child’s future education is important. However, it is also vital that parents ensure their children’s tuition fees and other associated costs can be covered should anything happen to them.”

He added that it was critical for parents to consider the rising cost of children’s education when planning their financial affairs as there were products available that could help them out.

“It is important when taking out any product to ensure that it keeps up with the rising cost of education, so that there is not a large shortfall when covering the cost of tuition fees. These kinds of financial services products are not indemnity products, but are designed to provide an affordable level of security to parents, while also ensuring that the most critical educational needs of their children are met first, such as tuition fees and any associated costs.”

He said a 2009 study by the SA Labour and Development Research Unit found that South Africans who had graduated from university were three times more likely to get a job and, on average, would earn up to four times more than those who did not finish schooling.

Anil Jugmohan, investment analyst at Nedgroup Investments, said in light of the economic climate, one of the best things parents could offer their children was the opportunity for a good education.

He said parents should consider all the options available to them. Savings projects such as Fundisa, a joint initiative between the government and the unit trust industry, could help.

Fundisa aims to encourage and incentivise individuals to save for children’s tertiary education by supplementing their 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,” said Jugmohan.

He said that for every R4, up to the first R2 400 that a consumer contributed to the fund each year, the government would contribute an additional R1. “In this way you are guaranteed a 25 percent return on your money. Furthermore, the money you invest, as well as the bonus from the government, is likely to earn more interest. This becomes a significant contribution in the long-term.”

Jugmohan said other savings vehicles parents should consider were unit trusts, endowment policies and trust funds.

“Unit trusts are collective funds which allow investors to pool their money in a single fund made up of various asset classes.

“This spreads their risk, but will still allow parents the benefit from professional fund management and reduced dealing costs.

“An endowment policy is also ideal for people who need more discipline when saving for their children’s education.”

Jugmohan said parents could save a fixed monthly amount for a set number of years and can choose to save any amount from R130 for any term between five and 15 years, and receive a tax-free lump sum at the end of the term.

“Education is one of the most significant avenues through which childhood aspirations can be realised,” said Jugmohan.

- Cape Argus