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Want to send your child abroad to study? Start saving now

Unless your child manages to receive a comprehensive bursary to study internationally, funding their education without the necessary savings could potentially put you out of pocket.

Unless your child manages to receive a comprehensive bursary to study internationally, funding their education without the necessary savings could potentially put you out of pocket.

Published Mar 30, 2022

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By Erik Olwagen, Head: Distribution, Standard Bank International Personal Banking (South Africa & Africa)

As Africans become increasingly global, many families are considering opportunities for their children to study abroad.

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Accessing specialised fields of study and experiencing new cultures and ways of living are just some of the benefits associated with a global education. However, the cost of funding such an endeavor is significant and one that requires careful financial planning well in advance.

So, unless your child manages to receive a comprehensive bursary to study internationally, funding their education without the necessary savings could potentially put you out of pocket. If you have the suspicion that they might want to study abroad one day and want to be able to offer the opportunity to them, you are going to have to start ring-fencing some funds for this purpose as soon as possible.

The reason being is that there are just so many costs to factor in. It’s not only the primary costs of tuition and fees, but there are also secondary costs such as books, transport, accommodation, health insurance and other general living costs to consider. If you plan to visit your child while they are there, or bring them back home during the holidays, that will also set you back financially.

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How and where to start

Let’s say you have a time horizon of 10 years; the first port of call is to set up an international bank account in your jurisdiction of choice. The tricky part is selecting a currency. While you may plan for your child to study in the UK, they may have different ideas for themselves. Of course, you can’t save in every currency just in case.

However, it won’t be sufficient to simply place foreign currency in this offshore bank account. It is critical to consider investment options that will help your money grow in time. The type of investment will depend on your unique circumstances such as time horizon, and appetite for risk.

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If you have time on your side, you may want to consider a more aggressive investment approach to start off with. As you get closer to the time for your child to leave home, however, you will need to strategise around your risk approach. This could mean taking some of the cash and placing it into a more conservative investment to buffer against any potential market volatility.

But it might be that you only have three to four years to save and in that case, your risk approach would look different. It is therefore advisable to consult an advisor to specifically address the objective and to map out an investment plan to achieve that goal.

Investment vehicles to consider

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In this scenario, you could consider a combination of:

  • Fixed term deposits and notice accounts, which are like bank accounts but provide elevated [interest] rates and liquidity and are therefore more appropriate for short-term needs.
  • More structured investments like capital protected-style products (structured deposits and structured notes) which vary between one- and six-year terms.
  • Unit trusts for additional flexibility.

Whereas if you want to put down a lump sum now, you may want to look at discretionary portfolio management services. So, instead of placing say USD1 million in one fund or investment, it could be used to invest in a well-diversified portfolio of investments.

It is important to note that these vehicles are all linked to risk. Depending on whether you are cautious, balanced, or aggressive, there will be different funds and different portfolios for each of those types of profiles. This is where the value of a professional comes into play.

A decision that requires careful consideration and planning

We understand that educating your child at a tertiary level presents many financial challenges and even in South Africa, it is difficult to forecast with complete accuracy on the exact costs associated as there may be a need to repeat courses or your child might change their field of study.

These costs may be exacerbated when they are in foreign terms, due to fluctuating currencies, and so one should carefully assess whether it is the right choice for their child.

Standard Bank has been in business for many years across the African continent and its International Client Solutions is well-established and equipped to provide clients with access to international banking and investment solutions.

Having recently won the International Investment Award for excellence in private banking, Standard Bank is poised to facilitate all your international banking needs and assist in your planning with regards to sending your child offshore to study.

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