Mandy Collins
For those of us without children, the last time school fees figured in our lives was when our parents gave us a small brown envelope for the school secretary, while they grumbled that R20 a term was akin to extortion.
Well, times have changed, and if you’re considering parenthood, or have just had a baby, you’ll be uncomfortably aware that a good education costs far more today.
The government provides a free education through to grade nine (standard seven), but funding the remaining three years can be costly. Fees at state schools range from R100 to R5 000 a year. Private schools cost upwards of about R4 000 a year. But that’s not half as frightening as the projected figures.
Nico Oosthuizen, manager of public affairs at Metropolitan Life, estimates that by the year 2006, the projected annual fees at some well- known private schools will range from R33 500 to as high as R57 000 – prohibitive sums for most people.
The best and probably the only way to manage to pay for such an education is to start early. Alastair Scott, a portfolio planner at Citadel Investment Services, recommends you start saving for your child’s education from the day he or she is born – or even planned.
“Of course, it all depends on what kind of education you are saving for,” he says, “but in my experience, it is usually the university or other tertiary education which is a problem for most parents.
“Most people can accommodate the normal school fees out of their monthly budget – unless it’s one of the more expensive private schools, and then they may need to make additional provision.”
You need to figure out how much to invest and for how long. Savings for primary school may be best in a unit trust, while money for university could be better invested in an endowment policy.
Starting to save early allows you to utilise the formidable power of compound interest in your favour. For example, investing R300 a month in an endowment policy, assuming 12% returns a year, would convert to R24 500 over five years, R69 011 over 10 years, and R227 358 over 18 years.
Many of the large insurance companies, like Metropolitan Life, Old Mutual, Sage and Sanlam, offer long-term insurance which is tailor-made for children’s education needs.
“The benefit of these,” says Scott, “is that they are usually endowment policies, to which you can attach life insurance benefits. And so, if the parents should die, the children’s education will still be provided for.
“The returns on those kinds of funds are not as good as, for example, a solid unit-trust investment – which has more flexibility – but then the downside is that you can’t attach life insurance to a unit trust.”
The policy options available are very different. For example they can be linked to insurance products or to unit trusts.
Southern Life’s Jonas Tshazi points out that its plan, Education Provider, for example, is not limited to education, but can support a child in the career of his or her choice. It could even be used towards buying a house, establishing a business or financing world travel.
With the variety of choices available, it is vital you plan carefully. Start by visiting a good life assurance broker or agent in the traditional market. They should be able to advise you on all the good policies which are available on the market, as well as on which will suit your needs best.
Oosthuizen recommends that you first work out approximately how much you will need to save. “Take today’s school fees and calculate the effect of inflation on them. Then work out when you will need the money – depending on whether it’s at primary, high school or tertiary level. Take those figures to a financial adviser who will help you to plan for your family’s education.”
It’s also worth finding out whether your employer will help pay for your children’s education. Many companies offer bursaries and grants, some offer study loans at very good interest rates, and others even subsidise the education of the children of long- standing employees. Many people are unaware that companies offer such benefits, so check with your human resources department.
With less than 10% of school leavers finding jobs these days, investing in your child’s future by providing the best education you can is even more important than before.