How to Afford your Child’s Education

The cost of education in South Africa is at an alarming all-time high, and these rates are northwood-paying-for-your-childs-educationnot showing any sign of decreasing in the near future. Budgeting for your child or children’s education is imperative, and need not be too much of an overwhelming task.

We suggest seeking the assistance and guidance from a trusted financial planner to set a long-term strategy in place through the use of carefully considered unit trust funds.

To simplify the process of understanding the life-long costs of paying for a child’s education, it is best to divide the costs into four segments.

  • Crèche/Kindergarten
    As early childhood development is doctored with great care, kindergarten fees are often extremely high; sometimes averaging a higher fee per annum than those of primary school fees.  A client of mine, a Johannesburg resident, has offered that the average monthly fee for crèche  costs R3 500.00 per month per child. With this, she has budgeted for R210 000.00 for preschool costs alone.
  • Primary School
    Following foundation phase, your child will enter primary school for a minimum of seven years. These fees increase incrementally each year in relation to inflation rates. A local primary school in Cape Town requires roughly R10 500.00 per annum (excluding uniform and additional costs); equating to about R90 000.00 by the time they graduate.
  • High School
    The cost of high school is marginally higher than that primary school. For example, education at Fish Hoek High School is R20 000.00 per annum. Onto this you have to add uniforms, text books, sports  kits and extra mural expenses, which can easily to amount to R150 000.00 in total for five years.
  • College/University
    At a local college, Cape Audio College, the cost of a three year tuition totals R210 000. As well as the tuition fee, additional costs of transport, text books, pocket money and living expenses, additional costs all accumulate, and by the end of the day, the parent or account payer is suddenly faced with considerable sum of money.

In summary: The cost of education for one child is estimated at a bare minimum of R650 000.00.

How do I accumulate this kind of money? With a simple investment strategy set in place by a trusted financial service provider, paying for your child’s education is achievable. As a financial planner myself, I personally would not recommend endowment policies. They are not efficient enough, and the premiums needed to get the value of money you will require is enormous. Any premium under R500 is a complete waste of time. I usually prefer unit trust funds for this, as the expenses and portfolio are transparent, and the fees low and manageable.

But, what happens if one parent dies or becomes disabled before they accumulate sufficient savings? This is where you would benefit from having an insurance policy in place. The policy would cover, among other expenses, your child’s education in the event of either death, disability or dread disease falling upon one or both of the lives of the parents.

For example; to save enough money over 5 years will demand and R8 000.00 payment per month. This is quite simply an unrealistic sum of money to pay. 

In my own family, we had set up a multi-strategy approach for paying for our child’s education. We began by setting up a trust fund which activated when our child turned age 6, and carried through to his Grade 12 year. As per our child’s desires, he took a gap year following graduation, during which, he worked two jobs. In tackling his college/university fees, we, as parents, paid for his first year of tuition, and had agreed that he would fund the following two years through part-time jobs and student loans. This strategy has made managing the overwhelming costs of education both more manageable and affordable.

Strategies like this can be done, but they require some help in advising and implementation. If you require assistance in funding your child or children’s education, contact Northwood Financial Services cc for a consultation.

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