Saving for education is one of the top four monthly expenditure priorities among lower-income households, says André Wentze, solutions manager at Sanlam Personal Finance.
Wentzel says that, according to a recent survey commissioned by Sanlam, 91 percent of more than 1800 South Africans polled considered education key to success, 77percent believed a qualification made people more employable and 92percent believed their children would need more than one qualification to secure gainful employment.
According to research based on Statistics South Africa data, having a matric certificate doesn’t do much to improve work prospects, and only a degree, diploma or certificate will make a difference.
“South Africans know this. Our findings reveal that, in lower-income households especially, saving for education is in the top four monthly expenditure priorities. But inevitably there’s a shortfall between what people can save and the real cost of education in South Africa,” says Wentzel.
He says that, according to a recent report from StatsSA based on 2017 data, only 33.8 percent of people aged between 18 and 24 were attending educational institutions, while only 11.6 percent were in tertiary educational institutions. More than half of the youth said they couldn’t afford tuition.
Wentzel says although the Fees Must Fall campaign was a catalyst for the introduction of free education for first-year students, it still leaves the challenge of finding funding to complete one’s studies. And for families with a household income of more than R350 000 a year, who are currently excluded, there’s a big gap.
He says that, according to StatsSA, education costs increased by 6.2 percent this year, while secondary education costs increased by 6.8 percent, both of which are higher than general inflation.
According to data collected by Sanlam, a university degree costs, on average, between R48 000 and R52 000 a year for tuition alone.
Wentzel says this means that, on average, parents with a child starting primary school need to contribute R20000 a year in order to save the nearly R600000 required to cover the tuition cost of an average four-year degree in 12 years’ time.
Parents who start saving later have to save more every month. The required savings increases to nearly R50 000 a year if they wait until their child reaches high school.
Wentzel says Sanlam’s research showed that 67 percent of all participants save less than under R20 000 a year for education, while 86 percent of people with household incomes of less than R10 000 save under R20 000 a year for education.
In the R10 000 to R30 000 bracket, 63 percent of people save less than R20 000 a year, and this drops to 40 percent for those in the R30 000-plus income bracket.
Wentzel says it is important that parents are empowered to make saving as simple as possible.
“Even saving small amounts adds up. We know South Africans are extremely aware of the benefits of education and how the world of work is changing. But it can be overwhelming worrying about what the best action to take is, especially as this may require great commitment, so it’s important that they have the tools to set goals and be in control of their savings plans.
“It’s important to know you’re not alone in this. I think the message needs to be that, as a parent, your’re doing an amazing job if you’re managing to save for your child’s future studies. Even if it’s small sums at a time, these add up. The earlier you start saving and the longer you save for, the better. Have a plan in place, use a tool like Goal Manager to stay on track, and consider speaking to a financial adviser for support and advice,” says Wentzel.
He says parents need to consider many things when looking at a savings account for a child as part of an overall education savings plan, such as the rising cost of living and how the savings will be impacted by this.
Neil Thompson, the head of product and customer value proposition at African Bank, says for parents who were wise enough to save money from an early point in their child’s life, the burden of school costs may be less.
“Most battle through the 12 years, though, continually stressed about what happens after school. The point is, education is not cheap, secondary or tertiary, and depending on the number of children you want to get through school and university, the costs can drain you literally and emotionally if you have not planned for these,” says Thompson.