OPINION: How much will it cost to study overseas?

If you want to send your child to the UK in 2019 for tertiary education, you will need about R2.5 million. If you have a young child, you will need upwards of R9m by the time they are ready to go, and you will need to start saving about R17 000 a month immediately, escalating by 10 percent a year, on top of whatever you are saving to send your child to local private primary and high schools.

Increasingly wealth managers are being asked about the costs of offshore education after matric by their high-net-worth clients due to a perceived decline in educational standards in South Africa. We investigated the costs and they are staggering. In South Africa, the average minimum cost of university tuition is around R35 000 a year.

Here are the minimum annual undergraduate tuition fees in US dollars for some top international universities.

• US: University of Michigan: $46 000 (R678 344); Brown University: $52 000.
• UK: University of Edinburgh: $26 000; University of Oxford: $32 000.
• Australia: University of Queensland: $26 000.
• Canada: University of Toronto: $32 000.
• Singapore: Nanyang Technological University: $12 000.

These costs exclude additional expenses, such as study materials, textbooks and cost of living for the student.

I investigated how much a client would need to save to send their four-year-old to study at the University of Edinburgh in 14 years’ time. I established that they would need to begin saving about R16 769 a month, escalating by 10 percent a year to have sufficient capital to cover four-year tuition and average cost of living in 14 years. This calculation assumes an inflation rate of 3 percent and currency depreciation of 7 percent.

• Current estimated annual costs are: Tuition: R345 800.
• Cost of living: R287 045. A year: R632 845; for four years: R2 531 380.
• In 14 years capital required (future value): R9 612 911.
• Estimated monthly investment (from today), escalating by 10 percent a year: R16 769.

It will take huge commitment and full family buy-in with kids at private schools for even wealthy clients to educate their kids overseas. The sooner savings start, the better. Due to the large capital requirement, the longer you have to invest, the smaller the starting value. Here are some savings recommendations:

1. Align your assets with your liabilities. As the liability in this case will be denominated in foreign currency it makes sense, to invest in foreign currency. This will protect the value of the investment should the rand depreciate over the period.

2. Do your homework. Understand the budget required for your child to live comfortably and determine whether this is realistic. Many of the universities supply estimated tuition fees and cost of living for international students on their websites – a good base to work from.

3. Investigate scholarships. Most offshore universities and colleges offer scholarships which can ease some of the financial pressure for exceptional students if they qualify. These scholarships are difficult to obtain, and the process of applying is somewhat tricky.

Charlene Prinsloo is a wealth manager at AlphaWealth.

PERSONAL FINANCE