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.
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
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
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.
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.