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Have a money problem that needs solving? Fin24 can help! This month our focus is on savings and how to better manage your budget. Send your question to editor@fin24.com or find the Money Clinic box on the right of our homepage.
QUESTION: I have a 9-year-old doing Grade 3 and a 3-year-old who is still in creche. I would like to start saving for their education - especially high school or when the little one starts grade R. I am not sure which financial company I need to save with or how to go about it.
ANSWER: Clive Atterbury, certified financial planner at Atterbury Financial Services, says parents should be commended for planning for the education of their children when the children are still young. Having money to save for this purpose is also a blessing, but with good budgeting one should be able to put away enough when you start saving in time.
Atterbury warns though that planning for the future and choosing between investment and saving instruments often need an independent an unemotional approach that a professional financial planner can help with. Look at well established financial services companies with a good track record over a longer period. He recommends a unit trust and/or an index tracking investment like the Satrix top 40 (either a unit trust or an EFT – Exchange Traded Fund). These investment instruments are transparent, liquid, low cost and safe (lower risk and highly regulated). They are extremely suitable for putting money away for your childrens’ education.
In the case of both unit trusts, called collective investment schemes these days, and EFTS, the investor essentially buys a proportionate share of the total underlying investments held by the fund. In the former the investor owns units issued by the fund.
There are a wide range of unit trusts and EFTs and many of them are tracking different indexes on stock exchanges. The Satrix website provides a lot of information in this regard. Young parents should also look at growth orientated investments (like a share portfolio).
It's even better if parents are spurred into action in terms of putting their personal finances and planning on a firm footing through a well thought out monthly budget which also makes provision for life insurance, retirement (an annuity could be a good choice), bad times (emergency/extraordinary expenses, etc).
