If you want to send your child to the UK in 2019 for tertiary education, you will need about R2.5million writes Charlene Prinsloo. File photo: African News Agency (ANA).
JOHANNEBSURG - If you want to send your child to the UK in 2019 for tertiary education, you will need about R2.5million. 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 R17000 a month immediately, escalating by 10percent 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 R35000 a year.

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

* US: University of Michigan: $46000 (R678344); Brown University: $52000.

* UK: University of Edinburgh: $26000; University of Oxford: $32000.

* Australia: University of Queensland: $26000.

* Canada: University of Toronto: $32000.

* Singapore: Nanyang Technological University: $12000.

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 R16769 a month, escalating by 10percent 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 3percent and currency depreciation of 7percent.

* Current estimated annual costs are: Tuition: R345800.

* Cost of living: R287045. A year: R632845; for four years: R253380.

* In 14 years capital required (future value): R961291.

* Estimated monthly investment (from today), escalating by 10percent a year: R16769.

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