JOHANNESBURG – The startling cost of education is driving more and more parents to start saving earlier for their children education. Yet few realise just how expensive it can be to educate a child.
Research by Liberty Group Limited has found that the approximate total cost of education for a new-born child is estimated at R2,023,000 for private schooling and R701,000 for public schooling. This excludes extra costs such as uniforms, textbooks, stationery, transport, extramural activities, and accommodation.
“Education is one of those sectors where prices are somewhat inelastic, meaning demand is less affected by a rise in price as parents will sacrifice to ensure their children get a good schooling,” says Mr Errol Meyer, Legal Specialist at Standard Bank Financial Consultancy. “The result is that these days if you want to give your child the best educational chance you have to start saving as soon as possible.”
As is usually the case with saving the earlier you start the better, especially since education inflation tends to outstrip consumer inflation by between 2% and 4%, depending on the year. Then there is also the fact that most parents will have more than one child. Meyer says an ideal way to save for your child’s education is a tax-free investment vehicle, which allows you put away up to R33,000 a year that you can cash out at the end of your particular time horizon without incurring any tax.
“Rather than chasing high returns, define how much you will need over the investment horizon and then invest in a product that offers a return profile that will achieve that defined goal,” he said.