A bonus to study

A new initiative known as the Fundisa Fund plans to reward South African parents who save for their child’s higher education by paying out an annual bonus to strengthen their savings.

A partnership between the department of education and the Association of Collective Investments, the Fundisa Fund rewards any investment of up to R200 a month by paying an additional 25% to the savings account. These funds will be used to pay fees at any government-approved tertiary education institution, which will receive both the savings and the bonus directly.

Simply explained: if you save R200 a month, you will have saved R2 400 at the end of the year. The government will then pay you a bonus of R600, putting your total savings at R3 000. If you save R200 a month for five years, government will have paid a total of R3 000, which is also the yearly cap on the bonus amount.

Although this is a flexible product, there is a minimum investment of R40 a month or R480 a year. You can invest using a monthly debit order or by investing ad hoc lump sums and, because there is no contractual agreement, you cannot be penalised if you are unable to make regular monthly payments.

Your bonus will be calculated on the amount you have saved during the year. If, for example, you have a balance of R1 000, the bonus paid will be R250. You can withdraw the savings at any stage, but then you forfeit the annual bonus, which will be paid only to the tertiary institution if you maintain the savings. Should your child decide not to study, the savings can be transferred to another learner.

This option creates an opportunity for people who wish to sponsor a learner other than their own child, provided the learner is a South African citizen.

A Mzanzi or similar account is needed to open a Fundisa Fund account. There are no upfront fees to open the account, but you will pay a 1,25% annual fee. Because Fundisa’s money is invested in an income fund, it is considered a low-risk investment, which should grow about 7% to 8% a year. Consider it an excellent way to start saving for your child’s higher education.

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