Hello there, parents of the future!
If you’re reading this, chances are you’re the proud mum or dad of a little tyke who, before you know it, will be all grown up and ready to take on the world. It’s an exciting, albeit slightly nerve-wracking, prospect. You’re probably wondering how on earth you’re going to plan for all the expenses that come with that, especially when it comes to their education. Fear not! Today, we’re going to take a deep dive into some of the best ways to plan for your children’s education expenses. Get ready to say goodbye to sleepless nights of worry and hello to peace of mind!
- Begin Early and Be Consistent
The sooner you start saving, the better. If you start when your child is born, you have about 18 years to save for university expenses. Even if you can only save a small amount, the power of compound interest will be on your side. In South Africa, many banks offer high-interest savings accounts specifically designed for educational expenses. Regularly contributing to these accounts can create a sizeable nest egg by the time your child is ready for higher education.
- Invest in an Education Policy
Consider an education policy as your dedicated superhero for your child’s educational future. These insurance products are designed to pay out a lump sum or annual instalments when your child reaches a specific age, typically when they’re ready to enter tertiary education. Old Mutual’s DreamBuilder Plan and Sanlam’s EduChoice are a few examples of popular education policies in South Africa.
- Consider Unit Trusts
Unit trusts pool together funds from multiple investors to invest in a variety of assets. The beauty of unit trusts is their flexibility. You can usually invest as much or as little as you want, and you can access your money at any time. The key is to choose a unit trust with a solid track record of performance. Consult with a financial advisor to understand which option suits your financial situation the best.
- Make the Most of Tax-Free Savings Accounts
In South Africa, you can contribute up to R36,000 per year (as of my knowledge cut-off in 2021) into a tax-free savings account, with a lifetime limit of R500,000. The great part about these accounts is that all interest, dividends, and capital gains are tax-free. They can be an excellent vehicle for education savings if used correctly.
- Involve Your Children in the Saving Process
Teaching your children about saving from a young age not only equips them with valuable financial literacy skills but can also help boost the education fund. Encourage them to save a portion of their pocket money or earnings from part-time jobs for their education. The importance of money management and the value of a rand well-saved is a lesson that will serve them well throughout their lives.
- Explore Scholarships and Bursaries
Don’t overlook the potential of scholarships and bursaries for your children. Many institutions and companies offer these as a way to attract talented students. Start researching early and help your child put together compelling applications.
Planning for your children’s education expenses may seem daunting, but remember, every journey begins with a single step. By starting early, being consistent, and exploring all available options, you’ll be well on your way to securing a bright future for your little one. Remember, education is not just another expense; it’s an investment into your child’s future.
That’s it from me today. Here’s to the future architects, scientists, authors, and world-changers in your family! Happy saving, folks!
P.S: Remember, financial planning is a personalised journey. It’s always a good idea to consult with a financial advisor before making any significant decisions.
