It's likely that you, as a parent, place a high value on your children’s schooling. You aren’t alone: parents around the world make huge personal sacrifices to enable their children to have a good education and enjoy a better standard of living than they do.
If, to that end, you are spending large amounts on school fees, and anticipate having to fork out for university fees too, have you thought about what would happen if you died suddenly, or were disabled to the extent that you could not earn an income?
Discovery Life has launched a revamped assurance product specifically designed to cover the costs of your children’s education in such an eventuality. The bonus is that if nothing happens to you while your child is at school and you lead a healthy lifestyle, your child’s tertiary education may be partially or fully funded by Discovery.
At a recent roundtable media event in Sandton marking the launch of the product, Gareth Friedlander, the head of research and development at Discovery Life, shared insights from a white paper Discovery produced on trends in education funding in South Africa.
Many South African parents in the middle- and high-income groups are opting for a private education for their children, and it doesn’t come cheap.
Friedlander said Discovery’s research showed that, for an average family with two children, private education, from crèche to the end of university, is likely to cost between R4 million and R5m.
The costs are exacerbated by the following factors:
• Children are starting pre-school at an earlier age than in the past.
• Education inflation is outstripping consumer inflation by about three or four percentage points a year. Currently, average annual tuition fees across public and private primary schools are about R20 000 and R100 000 respectively, Discovery Life’s white paper says. Fees at the most expensive public and private high schools in South Africa can exceed R40 000 and R250 000 a year. Given the current pace of education inflation, the paper says, this means that, for a child born today, his or her final year of schooling will cost about R600 000 at the average private high school.
• Supplementary expenses, on items such as uniforms, sports equipment and laptop computers, increase core expenses by about 50%.
Although parents want their children to have a good schooling, few start saving for it beforehand. And to make matters worse, couples tend to be having children at a later age: the average age of first-time mothers on Discovery Health Medical Scheme is 30. As a result, more people are funding their children’s education into retirement.
Most parents, as they do for household expenses such as groceries, electricity and transportation, pay school fees from their monthly income, rather than from a dedicated savings vehicle. So if your household income dried up suddenly, or was drastically reduced, your children’s schooling would probably be one of the first casualties.
The chances of a calamity are greater than you think. Friedlander says that, on Discovery Health alone, 30 parents die annually within the first month of having a child.
So the dual challenge is to save for your child’s education and protect against death or disability, he says.
Discovery’s Life’s Global Education Protector fits in with Discovery’s over-arching philosophy of changing behaviour and providing value across financial products through rewarding people who lead healthy lifestyles.
Research shows that, for each additional year of education, a person’s income increases by 10%; higher education lowers people’s mortality risk by up to 22%; and each additional year of education a country’s children receive boosts its gross domestic product by 18%.
The Global Education Protector will fund your child’s education to tertiary level if something happens to you. There are a number of options:
• You can choose whether you want to be covered for disability, severe illness and death, or only for death;
• You can choose to extend the protection to these events happening to your spouse;
• You can choose between the core or private benefit, with the private benefit more appropriate for a child at a private school; and
• If you are a member of Discovery’s Vitality programme, you could also qualify for the University Funder Benefit. This funds up to 100% of your children’s tertiary education fees for three years on the private benefit, and up to 50% on the core benefit, subject to a maximum amount.
The Global Education Protector may be seen as supplementary to general life and disability cover.
Premiums are relatively low, starting at R90 a month.