Fin24

Saving for a child's future

2011-12-07 07:24

A Fin24 reader asks:

How can I plan for my child's education?

Heather Robertson, a certified financial planner at Blink Consulting, responds:

All parents want their children to achieve their fullest potential and most agree that education is key.

But a good education comes at a price. From primary school through to university, education bills will be one of your heaviest financial burdens as a parent.

Fortunately, there are a number of strategies you can use to maximise the savings you put away for your child's education. Below is a brief overview of the most popular options currently available.

Fundisa account 

This is a government-incentivised education plan that gives you an annual bonus of up to R600 on an annual saving of R2 400. The funds must be used for your child's tertiary education, otherwise the bonus will be forfeited.

Lump sum investment

If you have a lump sum available now, it can be invested to provide a sizeable return when you need it most.

Due to the magic of compound interest, the longer you can leave the funds invested, the greater your return is likely to be. (Compound interest arises when interest is added to the principal, so that from that moment on the interest that has been added also earns interest.)

Education endowment plan

This investment provides a tax-free lump sum after five years. Depending on the product provider, minimum contributions will apply. You can also add premium waivers and investment guarantees.

Life insurance

Although not a savings product, life insurance gives you peace of mind that your child's education expenses will be taken care of should you or your spouse die or become disabled.

When your financial adviser calculates how much cover you need for education, your choice of public or private school, whether funds will be needed to pay for university as well as additional expenses such as uniforms and textbooks will need to be considered.

 - Fin24 

Comments
  • 100002617173228 - 2011-12-07 09:54

    Education in SA has largely become commercialised, which is rather sad actually. Teachers often bemoan the fact that they are underpaid, well, let me give you some facts. Rustenburg Junior School For Girls - Staff Costs 2010 - R7 972 649, 2011 - projected - R 10 255 869(as at 3 Nov. 2011)an INCREASE OF 28.64%.

      100000371390920 - 2011-12-07 20:27

      WHat is the increase in number of Teachers from 2010 to 2011? And what is the increase in school fees?

      100000371390920 - 2011-12-07 20:27

      WHat is the increase in number of Teachers from 2010 to 2011? And what is the increase in school fees?

      100000371390920 - 2011-12-07 20:27

      WHat is the increase in number of Teachers from 2010 to 2011? And what is the increase in school fees?

      FinCoach - 2011-12-07 20:28

      I have a few comments on your concerns around teachers' pay. Firstly, teachers are massively underpaid and undervalued for the work that they do (stop and think about that for a bit) and secondly, one of the big reasons that staff costs are so high is because government keeps reducing the amount that they will pay for staff. At the school where I am on the governing body we have 54 posts and only 18 are funded by the government...they cant find money for things that matter most to the future of the country but they have funds for fancy cars, hotels stays as well as new military equipment!

      FinCoach - 2011-12-07 20:28

      I have a few comments on your concerns around teachers' pay. Firstly, teachers are massively underpaid and undervalued for the work that they do (stop and think about that for a bit) and secondly, one of the big reasons that staff costs are so high is because government keeps reducing the amount that they will pay for staff. At the school where I am on the governing body we have 54 posts and only 18 are funded by the government...they cant find money for things that matter most to the future of the country but they have funds for fancy cars, hotels stays as well as new military equipment!

      FinCoach - 2011-12-07 20:28

      I have a few comments on your concerns around teachers' pay. Firstly, teachers are massively underpaid and undervalued for the work that they do (stop and think about that for a bit) and secondly, one of the big reasons that staff costs are so high is because government keeps reducing the amount that they will pay for staff. At the school where I am on the governing body we have 54 posts and only 18 are funded by the government...they cant find money for things that matter most to the future of the country but they have funds for fancy cars, hotels stays as well as new military equipment!

  • FinCoach - 2011-12-07 20:30

    Fundisa is a great concept but the product is fundamentally flawed - it is too conservative. If you have more than 5-7 years to save then stay away from Fundisa - you will do better in a different option (even without the bonus).

  • Delport - 2011-12-08 08:53

    What a stupid article... Said nothing useful. How about... Take R500 per kid you have per month and invest it in the following... OR Current tuition at university is Rxxx xxx.xx per year. Estimated yearly increase at xx% and you will need Rxxx xxx xxx.xx per child per year. So you will have to save Rxx xxx.xx per month at xx% estimated return to reach your goal and then look at the following investment ideas. This is usefull information NOT this article!!! Stop complaining about Teacher salaries some of these people actually have very high qualifications and they get paid less than the average debtor’s clerk in a small/medium sized company.

      Bullhunter - 2012-01-11 12:14

      Supply/demand ?Quality?

      Bullhunter - 2012-01-11 12:14

      Supply/demand ?Quality?

      Bullhunter - 2012-01-11 12:14

      Supply/demand ?Quality?

  • Bullhunter - 2012-01-11 12:11

    Don't EVER invest with any institution!!! Most of the contributions will go towards administration of the product!!!You'll do better by just keeping money in the bank.Talking from personal experience.

  • SandtonSage - 2012-01-11 20:45

    What a useless article!!! cliche cliche cliche

  • CherryTree - 2012-01-13 09:31

    Insurance for education is a very expensive option. The least expensive, but also the most rewarding, is to buy a townhouse and rent it out. If you scout, you can buy so that the cashflow shortfall between income and expenses on the property will last only 2-3 years at most. Continue to pour all of the surplus funds generated in later years into the bond, and the property will be paid off in 12 years. Now you're in a strong position since the rental income will pay for most, if not all, of the tertiary fees, and you still retain the asset. If necessary, you can take another bond on the property to pay for any shortfalls, knowing that the tenants will restore your asset to debt-free status in only a few years.

  • peter.fine1 - 2012-01-14 22:04

    From my first childs birth I have been investing in a portfolio of unit trusts with a monthly contribution and a 10% annual increase. There are now 4 kids in total and the amount in this portfolio has grown sufficiently that when each of them reaches that stage in their lives there will be sufficient to fund or at least pay the majority of their tertiary educational costs.

  • Gavin - 2012-01-17 08:25

    What a pathetic article - no meaningful advice. Anyone who thinks money in the bank is the best savings option is uninformed. To fund and education the best way ON AN INSTALMENT BASIS, is by means of Collective Investments (Unit Trusts) and if protection is needed in the case of a breadwinner, a life insurance policy to provide cash in the event of the death of the breadwinner. Kant en klaar

  • Nur - 2012-01-19 13:31

    Theres a property fund that will give you good returns, the security of bricks and mortar, and you can disinvest within a matter of hours. The portfolio is worth R17Billion, has a stable history, good fund managers,no estate agents,no speculators, no interest rate issues and has shown better year on year gain in the last 5 years than your direct property investments, if you apply the true & correct calculation. People did go property gaga as if it was a monoply game, most investors were taking Financial advice from Estate Agents and shouldve paid for third party advice instead.Which would have prevented the liabilities and property value RESETTING which is what you see today. Your bank earns by selling debt,your estate agent in not an investment specialist. Fools and their money were parted, or rather enslaved by debt, money deflates, if you measure gold it hasnt increased in weight,everything else is derivative based(maths formula for greed & gambling with no tangability). Now youre trying to sell at a profit which will not happen. South Africa has seen an 80+ % drop in estate agents,bond originators and property related industires.But a converse in debt counsellors and most of our economically viable citzens will default (8.9million people). So chat you your financial adviser,investment adviser,stock broker or FSB approved broker who can add CIS,GIP,etc to your portfolio,give yu sound advice, and instruct you to budget n save and not live above your means like the prior.

  • pages:
  • 1