Parenting - Budgeting - Child Education Parenting - Budgeting - Child Education

Saving for your childs education

There’s no doubt that babies can be expensive. Nappies, childcare, clothing, equipment – it all adds up, particularly if you’re a one-salary household. When you’re in the midst of those busy few years of your child’s life, chances are that the last thing you’re thinking of is your child’s education. But perhaps you should be.

Where and how to educate your child is one of the most important decisions you’ll make for him or her. It can also be one of the most expensive. The average cost of a high school education varies greatly, depending on location and the type of education you choose – but chances are it will be more than you think.

Most parents want to provide their children with the best possible education – but the rising cost of education is putting an increasing strain on family finances.

When a child is very young, we know that there’s a cost associated with education, but we don’t really measure it out. We often think that the only cost is the school fees and don’t consider the big picture.

It’s important not to forget about money needed alongside the tuition fees  for items such as:

  • Clothing

  • Incidentals

  • Excursions

  • Computer and internet costs

  • Stationery and text books

To help you get a clearer idea, speak to your financial advisor or visit a few financial institution websites.

How to plan for your child’s education

The best advice for planning your child’s education is to start early.  We suggest that parents start from birth. This way, you can give your money time to compound with interest.

Strategies to use to save for your child’s future

By having a plan in place, you can find a way to put money away. Here’s what you can do:

1.  Watch your debt

Many parents complain about the cost of education, yet they drive luxury vehicle. Your child’s education is far more valuable than a luxury car, and education doesn’t depreciate. When you buy a house, car or take on any debt, do not do it at the expense of your child’s education!

2. Grow savings painlessly

If you received a salary increase this year, sign a debit order immediately to put 2% of your additional income into a savings account. Commit to increasing that every year by a further 2% and, within five years, you will be saving 10% of your salary.

3. Set realistic goals

It is very difficult to save enough to pay for your child’s secondary or tertiary education in full. Rather target the growing gap between your salary increases and the increase in school fees.

You also need to save for the jump in school fees when your child moves into high school.

4. Have a plan

A good starting point is to enrol your child in a school that you can afford on your current salary. Then, as soon as your child starts Grade 1, increase your savings by the difference between primary and high school fees.

You will then be setting aside a realistic percentage of your salary for your child’s 12 years of education, and the savings will supplement the annual fee increases in high school.

(Note: this would be simply to cover future increases in school fees and not tertiary education.)

5. Start a fund

Every parent needs to be saving towards their child’s education unless they plan on inheriting a large fortune. To boost those savings, ask your family to rather add money to your child’s education fund than buying those expensive birthday presents. After all, children need an education more than they need toys.

6. Invest for growth

If you are saving for 5 or 10 years before you will need the money, ensure that you invest in a fund that will grow faster than the increases in school fees. Cash-like savings will not be enough as they return about 5% at most, whereas school fee increases of about 10%.

Consider investing in a unit trust that has exposure to property and equity. A balanced unit trust would be a good option.