Cape Town - Here's a wake-up call for all parents. If you haven't set anything aside to provide for your child's education, there's no time to lose.
A brief look at today's school and university fees should be enough to jolt most parents. If your child started grade 1 at a public school this year, you can expect to pay about R450 000 for 12 years of schooling.
A private school could set you back about R1.5m, once uniforms, learning materials and extramural activities have been added.
About 40% of first-year students drop
out of tertiary education because of financial difficulties - hardly surprising considering that a three-year university degree will cost around R350 000 in fees alone, excluding travelling expenses, accommodation and allowances.
These are scary amounts for most of us. How can you afford them? The best plan is to start saving when your child is born.
If your son or daughter is born today, you’ll need to save R1 500 each month for public schooling and a three-year degree if you increase your premium with education inflation, and R3 200 each month if you keep your premium level.
To pay for private schooling and a three-year degree, you’ll need to start saving R3 800 per month - that’s if you increase your premium to keep pace with education inflation. But if you opt to fix your premiums, you’ll need to save R8 100 per month.
“That amount can seem terrifying, but it’s important to act, and to empower yourself with knowledge on education costs by using the new generation of online calculators,” says Jaco Gouws, product marketing actuary at Old Mutual South Africa.
Don't think you can bank on a bursary either. Gouws says a quick fix like a loan or bursary could backfire badly.
It's best to assume you'll need to pay for your child’s entire education, as the financial aid you could be pinning your hopes on may not even materialise. Then if a bursary or scholarship is awarded, you can enjoy it as a windfall to your finances, says Gouws.
You could of course take out a loan, but Gouws points out that while several financial service providers offer student loans, they can take years to pay off.
That monthly overhead can make young graduates feel like their lives are on hold and prevent them from buying a house or investing in their own children’s education.
What’s more, some institutions won’t lend money for part-time study, or withhold certain benefits from part-time students.
“The fuel price may fluctuate and the finance minister may raise or lower taxes on luxuries, but with education inflation running at around 9% per year, the cost of education will only go up,” warns Gouws.
Knowledge is power. “Preparing for your child’s education starts with empowering yourself with accurate information about the costs," says Gouws.
A good financial adviser will provide you with the information and guidance you need - and above all, nothing beats an early start.
- Fin24Old Mutual's Jaco Gouws sent the following response to comments posted below:
The amount of R350 000 refers to the future cost of a university education for a child going to grade R (aged six) now. We have assumed a current conservative cost of R35 000 per year for university. A six-year-old child will be going to university in 13 years.
His first year at university will then cost just over R107 000, assuming that education inflation continues at 9% per year. His second and third year will cost about R117 000 and R127 500 respectively.
The total of these three years amounts to just over R350 000.
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