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South Africans value a good quality education

26 Jan 2017

But need to start saving sooner rather than later

With another school year already in full swing for thousands of South African learners, Liberty looks at the importance of planning and preparing financially for a child’s educational journey.

According to the SA Frugality Report of May 2016, only 21% of the respondents surveyed found the idea of sending their children to cheaper schools as an attractive option for saving money. Most people, it seems, understand the importance and value of a good education, despite the escalating costs of education.

Mark Lapedus, Divisional Director at Liberty Investments says the money that parents spend on their children’s education can easily be one of the family's biggest expenses. While most parents prioritise saving for tertiary education, the truth is that saving for the foundation phase of your child’s education is just as important, if not more important. Consequently, preparing for your child’s education should start as soon as they are born. “The sooner you start saving for your child’s education the more time the money will have to grow. Think of the power of compound interest, for example if you saved R200 a month for seven years, your savings would be worth R16 800 at 0% growth. However, if the investment grew at 10% a year, then your total return would be R24 800,” says Lapedus.

School fees increase by about 10% a year – with that in mind, checking in with a Financial Adviser is a good place to start. Boitumelo Mothoagae, Financial Adviser at Liberty gives the below tips to assist parents in putting together a solid plan towards saving for your child’s education at different stages:

  • Start saving during your pregnancy

It would be wise to start saving for your child during your pregnancy. While it might seem like you’re jumping the gun, once you find that you’re having a child, there may be many things that you will need extra money for once your little one arrives, like an unexpected trip to the doctors’ office. Equally you could do yourself a big favour by investing and putting a small amount of money away every month towards your child’s education; by the time they start primary school, you will have saved enough to give your child a fulfilling, memorable and most importantly, an excellent primary school experience.

  • Stay disciplined to enjoy the power of compound interest

It is very easy to become distracted when saving for a long period of time. However you can find comfort in knowing that compound interest is working in your favour, considering that in seven years’ time high school fees at a ’Model C‘ school will cost around R35 400 a year; or R216 000 for all five years. A relatively priced private school will set you back approximately R540 000 for the five years. It is essential to start saving for your child’s education at an early stage to ensure that the money can mature as your child grows.

  • Make sure your goals are realistic

Whilst having big dreams for your children and their education is encouraged, saving and financing their education requires a more realistic approach. The amount of money you can save; the amount of time you have to save it and the different institutions that you hope to send your child to, are all factors that need to be considered when saving for your child’s education. Fortunately with the help of a financial adviser you will be able to get the best advice regarding all of the above mentioned factors, as well as where to invest your money to ensure satisfactory growth of your investment.

“Saving for your child’s education shouldn’t be a daunting task. If you start planning early this will help you to avoid taking out loans that may take you years to settle,” concludes Mothoagae.

For more information please contact:
Zolani Mtshali - Media Relations Specialist: Liberty IA
011 408 1940

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