When the going gets tough, the tough stay focused on the future. No matter how sluggish the economy is, or how unknown the future of work is, smart parents know that a good education remains the surest way to safeguard your child’s future.
With Artificial Intelligence (AI) and climate change giving rise to new careers in robotics, solar energy generation and space tourism, a solid grounding particularly in subjects such as Science, Mathematics and Technology will continue to open a variety of career options.
Whether your young one is dreaming of being an environmental engineer or designing space crafts, the best thing you can do as a parent is to start investing for their education as soon as possible.
What the numbers say
If your child starts Grade R this year, with education inflation of 9% (which is higher than general inflation), you can expect to pay around R1.6 million for their public schooling up to matric and a three-year university qualification. If you choose private schools and university, the costs double to R3.7 million.
But what does this mean?
For this year, your monthly costs for school will be around R3 500 for public school and R8 500 for private school. This may be a significant chunk of your monthly budget and excludes any additional costs like uniforms, stationery, extramural activities, sports or club fees and extra tuition.
If you’re already saving for your child’s education, you are probably not too stressed. But the reality is that 55% of urban South African parents are not saving for their child’s education, according to the latest Old Mutual Savings and Investment Monitor.
Says Marius Pretorius, Proposition Manager at Old Mutual: “A financial adviser can partner with you to recommend and choose a solution that takes your specific needs and circumstances into account, including your budget and timeframe. Finding R400 in your monthly budget now to save for your child’s education will ensure that when they reach high school or university, you will be in a much better financial position to cover some of their costs.”
Investment options to consider:
a Tax-Free Savings Plan, which offers you tax-free growth and flexibility. However, opening one in your child’s name can impact them later, if they want to use this as a savings vehicle, as the lifetime limit (currently R500 000) will apply.
Old Mutual’s SmartMAX Focussed Plan ensures more disciplined savings through regular contributions over a fixed term. These plans also offer premium protection to ensure that the investment goal is reached, if the parent becomes disabled or passes away.
Old Mutual Invest Flexible Plan lets you save regularly or with lump sums and gives you access to your money when you need it.
Unit Trusts – Old Mutual has a comprehensive range of unit trust funds which offers you the flexibility to choose one or more funds based on your needs, goals and time horizon.
Pretorius adds: “While the education costs can seem overwhelming, proper planning, a partnership with the right adviser and the discipline to stick to your financial plan will ensure you are able to give your child the valuable gift of a good education.”
5 tips to help you save:
Draw up a budget and stick to it
Knowing what you spend your money on - and how much - can highlight areas where you can cut back. Apps like 22seven by Old Mutual can help you categorise your spending. You can also set saving goals and action them through the app. Make your family part of the budgeting process so that they feel involved, understand and support it.
Increase your income
Are you a baker, crafter, Zumba instructor, DJ, photographer or writer? Using your skills after hours and on weekends can help you supplement your income. You’ll need to balance your time carefully, but this extra money could be used to save for your child’s education, meet any monthly shortfalls, fund a well-deserved break for you and your family or set up an emergency fund.
The internet has made virtual shopping for bargains a breeze. There are many surveys that compare specific items from different retail stores and show you which is the best deal for you. Buying items like stationery or washing powder in bulk when they are on sale can save you quite a bit too.
Maximise your loyalty programmes
Many retail stores now offer all sorts of benefits and discounts through their loyalty programmes. Familiarise yourself with the rules, how you can earn maximum points or capitalise on savings. Old Mutual Rewards gives customers a percentage of their premiums back in points. You can use these to reinvest, to spend with a range of partners or to buy a voucher. Your next mani and pedi could be on the house!
Give a gift for the future
Instead of giving your children expensive gifts, opt to give them a smaller present and then top up their education savings or unit trusts with the rest. This is a great way to teach them about delayed gratification. Let your family and friends know that they can also contribute to this fund instead of buying big gifts.