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14 Feb 2011 10:01
Parents with a child starting grade one this year at a Model C government school can expect to pay R368 000 for their child’s primary and tertiary education.
This is assuming starting school fees of R16 000, increasing at 10% each year.
By the end of primary school the annual school fees would have reached R28 000 with a total cost for the seven years of R151 000.
Although a Model C high school today would cost in the region of R20 000 a year, by the time this grade one reaches high school, the annual fees would be R35 400—setting parents back R216 000 for the five years.
If you started saving R500 a month from the day your child is born you could actually have enough to pay for high school.
If you only started saving from grade one, you would have to save R1 354 a month.
The really scary figures start when you look at private education.
Based on a very conservative school fee of R50 000 a year today for grade eight, by the time your grade one starts a private high school the annual fee will be in the region of R88 000 a year.
Their high school would cost you R540 000 (R1-million for 12 years).
You would need to save R1 450 from the day they were born or R4 132 from the day they start grade one in order to have a lump sum to pay for their high school.
But before you rob a bank or try and sell your child into forced labour, let’s be realistic about what your goal really is.
Trying to save the full lump sum for your child’s education is not practical while allocating a percentage of your monthly budget to education is. What you are saving for is to keep that percentage stable.
The first and most important aspect to understand is that school fees will increase more than your salary each year.
Despite an inflation rate of 4%, education costs have continued to rise between 9% to 10% each year as schools try to maintain a high standard and attract quality teachers.
Salary increases on the other hand have averaged 6% to 7%, which means school fee increases outstrip your salary every year.
Your first goal is to save so that you can supplement this difference without education taking a bigger bite out of your household finances.
The high school gap
Your second goal is to fill the gap between high school and primary school fees as you will be paying about 20% more on top of the impact of fee escalation.
Saving for the gap
Based on the model C example, if you wanted to pay the same percentage of your monthly income over the next 12 years of your six-year-old’s education you would need to supplement it from a lump-sum saving of R98 000 or R750 from the time your child was born to grade one.
A more practical approach would be to save the escalation short-fall for primary school (R17 500) and for the seven years of primary school save the difference between primary and high school fees (R4 000 a year or R330 a month).
By the time they start high school you would have saved about R44 000. This would cover the escalation short-fall during their high school years and you will just channel the R333 a month savings you were already making into the higher secondary school fees so there is no impact on your household finances.
The private school gap
The difference between a Model C school and private school fees is around R30 000 a year. You would need to save R150 000 to fund that short-fall or R400 from the day they are borne until high school.
Approaching education savings as a gap filler makes it less daunting and quite frankly, more realistic.
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