Mar
Articles, Money-Wise
Investing For Your Child’s Education
Having a good education opens doors. It leads to greater opportunities and higher earning potential, but the cost of tertiary education can be a shocker – currently around R40,000 to R60,000 or more per year for a bachelor’s degree, depending on where you study.
Experts predict that this will skyrocket to around R160,000 per year by 2030.
While these numbers may seem overwhelming, don’t despair!
You may not be able to save up enough money to cover everything, but whatever money you do have will help when the time comes.
It’s also important to note that not all kids are academic, but it would still be wonderful to have a nest egg to contribute towards their wedding, set them up in a small business, or give them money to take a gap year and travel.
When it comes to investing, remember:
- Make investing automatic – i.e. pay by debit order
- Don’t be tempted to cash in before the funds are needed
- Make sure you beat inflation
Where should you invest?
It’s a personal choice, but here are the options:
Bank savings account
With a bank savings account, you are paid a fixed interest rate but these interest rates are generally quite low and below inflation. Your capital is guaranteed, but while a bank savings account is a good idea for an emergency fund, it’s not going to give you the best long-term growth.
Shop around to see what interest rates are on offer as these change all the time.
Unit trusts
Investing in unit trusts allows you to access the stock market (shares) which provide very good inflation-beating growth over the long term.
Most financial services companies offer them and you can invest directly. You may want to get advice, though as there are around 1000 unit trust funds in South Africa, so it can be daunting deciding which fund to pick.
If you’re invested in the right fund, you can get excellent long-term growth.
Tax-free savings plans
These types of investments also offer you good growth potential and there is no tax payable on any aspect of the investment, so all the growth is yours.
You can access these through a bank account or through a financial services company where you will be able to invest in funds that invest in shares (similar to unit trusts).
There is a lifetime contribution limit to R500,000 and each year you may only invest a maximum of R36,000 into a tax-free savings plan. These can be opened in your child’s name as well.
Education policies
These are offered by most financial services companies as endowment policies. You commit to paying a premium for a fixed period of time (minimum five years), and the funds are paid out at the end of the term.
The growth of the investment is taxed at 30% but the funds are paid out to you after this tax has been paid. You can also add life cover or illness or disability cover to this policy so that if something happened to you, the policy would continue and your kid’s education will be secured.
Kids deserve the very best and a good education is an everlasting gift. Make it a reality – start investing today.
This article was written by Sylvia Walker, financial planner, speaker, and author of smartwoman. www.sylviawalker.co.za
Mums, do you already have an investment plan for your child’s education? Or will you be looking into these options after reading this?
Comment below to let us know x
I would love to secure an investment in education but there is always something that needs the money a bit more right now. I know things shuffle around once you start and believe the tax-free savings is where it’s at. But from a religious point of view I will have to search for something that is non interest bearing.
Hi Rushannah. There are Shariah compliant funds that you can invest in. Offered by most major financial institutions.
I have opted to save money for my children’s education every month instead of having educational policy.
Thank you
#Mumbox
Its a concern as because of the pandemic so many parents cannot afford policies or investment as its tough to get to the basic in life. However you need to understand the importance of an Education plan or investment . Sacrafice indeed . Its an investment for your childrens futhure as what we face now we not sure what challenges they will have growing up . INVEST sacrifice and stay driven and focused
This article has made a difference to me in a big way,it’s made me realize that I need to get my investments and savings on point for my child
In this day and age it’s really hard saving due to things becoming so expensive but thank you will definately try some of this advise to save for my kids
This article open my eyes..i must invest money for my kids for education. Thanx mumbox
I do have an investment plan for 1 child
Eye opening article to invest more
I will definitely look into these options when I get a job or stable income 🙏🏾 thank you for sharing
As parents we are very much invested in Our kids education and it does cost a fortune every month.
I’ll have to sit down with my partner and discuss the methods above. I’m thinking the tax free savings account will work out best in our case.
Thank you Sylvia Walker for the advice. 🌹🌹🌹
Yes saving for education has now become a necessity….the only problem is that it is still overwhelming as to which investment is best and gives us a better outcome at the end, but most importantly can we trust them with our plans for our children’s future.
I have been doing the tax free savings with Stash and that’s a small investment but good. Would like to invest in something that can make our money grow even more.
Any suggestions about which unit trust is best and good value for money, please 🙏
Thanks mumbox
Cancelled educational policies because it was not growing right now I wanna try tax free savings plan n see how it goes wanna invest where I see growth
Thanks but I canceled educational policies because they were not growing right now I wanna try tax free savings