As most parents know, times are tough. Given the ongoing pressure on personal finances, the reality is that many parents struggle to prioritise saving for their children's education, with 57 percent of urban parents not saving for their children's education, according to the 2017 Old Mutual Savings and Investment Monitor.
Marius Pretorius, the head of marketing: retail savings and income solutions of Old Mutual Personal Finance, said with long-term education inflation expected to be 9percent this year, surpassing general inflation, parents often found themselves in a pickle when it's time to send their child to school.
“If your child starts Grade R in 2019, you can expect to pay between R1.4 million and R3.4m for public and private education respectively over their school career. This amount includes primary school, high school and a three-year university qualification. It's clear the time is now to make education savings part of a holistic financial plan so that when the time comes, you can afford to give your child the best education,” said Pretorius.
If your child is entering a public primary or high school this year, you can expect to pay on average about R37000, while a private primary school and private high school will set you back R92400 and R148300 respectively.
When it comes to university education, parents can expect to pay R64200 this year, on average.
Pretorius said: “Most parents will find it hard to fork out these costs in full at the start of the year unless they've diligently been saving beforehand. If not, they'll have to factor this expense into their monthly budget, which may be a stretch for many.”
Parents can avoid this shock by starting to save as early as possible.
While there are various education savings vehicles available, Pretorius recommends that parents look at the solutions best suited to their budget, time frame and their individual requirements.
“Depending on your needs, you can choose between solutions starting from as little as R200. This means that, by simply cutting out eight coffees a month, you can start saving for your child's education. Reframing education savings in this way can help parents who are worried about where they'll find the extra money on a monthly basis.”
While a tax-free savings account may make sense for some, keep in mind that opening one in your child's name can affect them later if they wish to use the vehicle for their own savings, because the lifetime contribution limit is R500 000.
“There are hundreds of career options available nowadays, with many more still to come. Just think back a decade or two – data scientists, search engine optimisers and social media lawyers didn't feature on the ‘options to study’ list and yet today they are sought-after skills. To set your child up for lifelong success in whichever career he or she chooses, it is essential that you have an appropriate financial plan to back it,” said Pretorius.
Pretorius said rather than being panicked into inaction, empower yourself with information and ensure your financial plan mirrors your financial priorities.
“If you're unsure about where you can find some extra money in your budget, tools such as Old Mutual's free 22seven app show you where you're spending your money and thus help identify where you can start cutting. If you're unsure about where to start, reach out to a qualified financial adviser.”
Supplied by Old Mutual