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Providing your children with the education they need to build a successful future is something most parents strive for.
But with the cost of education increasing annually at a higher rate than inflation, and average salaries barely keeping pace, putting your kids through school needs to be part of a considered financial plan.
This is according to Marius Pretorius, Proposition Manager at Old Mutual, who cites an alarming Statistics SA finding that almost two in every 10 potential learners are unable to attend school or a tertiary institution due to a lack of funds.
“This is extremely worrying and suggests that many parents are not planning sufficiently and also not aware that help is out there. The fact is you don’t have to shoulder the burden of financing your child’s education alone.”
Only 35% of metropolitan working South Africans prioritise saving for their child’s schooling, according to the 2017 Old Mutual Savings & Investment Monitor.
“While the national government announced that students from working-class homes would qualify for free higher education from this year, offering some relief, fees are only one part of the equation and parents should continue to factor in the additional expenses related to education,” says Pretorius.
Caption: The cost of education is expected to increase by about 9% per year. This means that in 5 years' time you could be looking at school fees of around R50 000 per annum - for public school.
Pretorius believes this is because many South Africans are too overwhelmed by trying simply to make ends meet and satisfy the most basic of needs such as food, shelter and clothing. “This is where great financial advice and holistic financial planning could make all the difference. The value of financial advice lies in its ability to help stretch and grow whatever money you have, whether it’s a lot or a little. Too many South Africans have the misconception that financial advice is a luxury that’s only reserved for the wealthy.”
Pretorius explains that a good financial adviser will work with you to help you create a financial plan that suits your life. “They will have a detailed discussion with you to understand your personal situation and your unique needs and goals before suggesting solutions such as an appropriate education plan.”
Working with a financial adviser to save effectively for your child’s education means you don’t need to grapple with this daunting responsibility on your own. It also means you will devise a strategy that is sustainable and do-able without financially burdening your children or community down the line.
“Tapping into precious retirement savings or taking on expensive debt to enable your child to go to a good school or university may seem like feasible solutions, but they could have uncomfortable long-term consequences,” says Pretorius. “For example, you may have to depend on your children or community at a later stage to service the debt you took on or to help fund your retirement.”
Starting to plan as early as possible, concludes Pretorius, is the best gift you can give to your children. “A solid financial plan will give you a blueprint to stick to and will ensure you don’t have to make complex decisions about savings vehicles and investment strategies alone.”