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The hidden costs of education

29 Jan 2020

By Henk Appello, Lead Specialist for Investments at Liberty

The beginning of a new school year often presents excitement for families whose children are going to school for the first time or proceeding to the next grade. Whilst most parents understand the ever-increasing cost of education, families often struggle to prepare for the year of school ahead, including the hidden costs that go beyond the school fees.

As a parent of learners, you know that keeping up with hidden costs such as stationery, extra mural activities, and digital tools required by schools can be daunting for anyone who is unprepared. With education inflation set at 9% parents need to take a long-term view when planning, to ensure that from primary and secondary school all the way through to tertiary, all educational costs have been considered, and every milestone is covered adequately.

Education is one of the most important legacies you can leave for your children, and yet, studies have shown that 40% of university students don’t know where their next meal is coming from. Without the right education plan in place, parents risk their financial wellbeing by getting into debt to provide for costs such as registration, tuitions and accommodation, a risk that can be avoided, with adequate long- term planning.

Below is a table illustrating the hidden costs of education through primary, secondary and tertiary education years:

Figure 1. This illustration presents the rising and cumulative costs of education throughout the three phases of primary, secondary and tertiary schooling. This table indicates the escalating impact of costs which could otherwise be avoided by adequate financial planning, thereby keeping the scale of cost impact in the green zone, which represents a more favourable financial position.

Thankfully, there are many solutions to help parents curb the escalating costs of educating their children. I asked Daphne Rampersad - Senior Specialist for Financial Planning at Liberty for guidelines tat you can use to secure your child's future and prepare for the cost of education.

  1. Investment and insurance
  2. Many institutions such as banks and other financial service providers, will offer you financial products, including insurance or investment options, which will assist in saving for your child’s education needs later in life.

    Liberty offers education cover through the comprehensive EduCator benefit, which forms part of the Lifestyle Protector product. It pays directly to the child's institution and will pay up to a maximum for the child's first tertiary degree.

    Education cover provides policyholders peace of mind to ensure their children have a bright future, especially if unfortunate circumstances could prevent them from providing for their children’s education, whether it be death, disability or critical illness impacting on their ability to earn an income.

  3. Daily savings
  4. Saving money day-to-day is a creative process for parents, from packing lunches instead of giving tuck money, to shopping around for less expensive items, or taking a less expensive holiday to pay school fees upfront for the term. Spending less on life's luxuries, to afford a dream study direction later on, may seem like a small sacrifice, when your children become successful.

    Budgeting for your daily education expenses is important and can make a significant impact on how much you spend. Whether it’s to plan how much you’ll be spending or creating a framework to curb overspending and cutting down on unnecessary costs, planning upfront will provide relief.

    While it may seem opportunities to save are few, there are several milestones in your child’s school career that may provide the opportunity to save more, if you plan ahead.

  5. Side hustle for a purpose
  6. A second income generated from a passion project or in a role you can easily execute on the side, to supplement your income, may be the answer to filling the financial gaps or even building up a deposit for an investment into your child’s education.

    South Africa is not unique in this growing trend for side hustles. International surveys have shown that 35-45% of employed individuals hold multiple jobs, and there is potential for this to grow to 50% of the work force. According to Liberty, 20% of the formal workforce is side hustling, with the trend likely to grow.

    If you’d like to estimate the costs of your child’s education, try out Liberty’s education calculator. This education calculator shows how much the annual cost of education will be in the future based on inflation and your calculator entries.

Liberty Group Ltd. is a registered Long-Term Insurer, and an Authorised Financial Services Provider (FAIS no 2409). Terms and Conditions apply.

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Liberty Group Limited (Reg. no 1957/002788/06) is a registered Long Term Insurer and an Authorised Financial Services Provider (FAIS no 2409).