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The answer is eye-watering – higher education fees will more than treble by 2030. Here’s what you can do to prepare for the rising cost of a university education.
A good education is one of the most valuable things a parent can offer their child. The harsh reality is that it is becoming increasingly more expensive to do so.
South African households are feeling the impact of rising costs as education inflation of 9% far exceeds general inflation. Parents need to understand the future costs of education and prepare themselves.
"The key is to start saving early," says Jean Minnaar, General Manager, Savings Solutions at Old Mutual Emerging Markets.
Alarmingly, Old Mutual’s 2016 Savings and Investment Monitor shows that 54% of urban South African parents are still not actively saving for their children’s education.
"A parent whose child starts grade R in 2017 can expect to pay between R1 332 112 and R3 011 315 for public or private education respectively. This rand amount includes primary school, high school and a three-year University qualification in 2033," explains John Manyike, Old Mutual’s head of financial education. He also noted that parents should factor in additional costs such as uniforms, textbooks, stationery, transport, food, extra lessons, extra mural activities and accommodation.
You need a plan, a disciplined approach and a suitable solution to save enough. To begin the task of saving, Minnaar recommends choosing investments that will give returns higher than education inflation. Saving solutions from Old Mutual include education savings policies, tax-free savings accounts and unit trusts.
"Even if you can only afford a small amount to begin with, the important thing is to start," explains Manyike. Parents can invest as little as R170 per month into the 2-in-One Saving 4 Education Plan, R250 into the SmartMAX Focussed Investment Plan or R500 per month into unit trusts.
Parents should consider their specific household budgets and circumstances when deciding how much they can invest per month and which plan would best suit their needs.
* Figures are based on selected ex-model C government and private schools and universities. Projected annual fees are increased at a flat rate of 9.5% annually. This includes university fees where the long-term strategy for fee increase restrictions are still uncertain.
See A matter of degrees in Issue 1, 2017 for fascinating – and opposing – insights by two academics on how fee-free education would impact the future workforce.