Saving for you Child’s Education is paramount to ensuring they have a great future. More than ever before a Bachelors Degree is becoming the minimum standard requirement for gaining employment. It is no longer the ‘desirable extra’ it once might have been. This may mean that without a tertiary education the chances that a young South African will find the job they are looking – and hoping – for are becoming slimmer.
Most parents are are acutely aware of this fact and want to be able to help their child gain the education they need. However, all too often they are faced with the harsh reality; they simply did not save enough to do so and their child will now face a murky path involving student loans and part time jobs to try and make it through their chosen course of tertiary education. Therefore, in order to avoid this dim future it is wise to make a formal plan to save and the earlier you start doing so the better.
How Old Should Your Child Be Before You Start Saving for Their Education?
In the US, where the costs of attending colleges and universities are high, some parents begin ‘saving for college’ pretty much as soon as their child is born. In decades past some thought that doing so was slightly crazy, but they have been proved to be the smart ones. As university costs rise an average of 3% a year here in South Africa you’d be a smart one too if you consider doing the same thing.
Where Should You Save for Your Child’s Education?
Any savings instrument you chose should be strictly reserved for education funds only. That means that relying on a simple savings account offered by your regular bank may not always be the greatest idea. Opting to do so may not only mean you won’t be getting the best return on your money but the temptation to occasionally ‘borrow’ from it, may just be too great.
Instead shop around and look for a good, high interest savings account that will be easier to ‘separate’ from the household’s everyday finances and financial accounts. If you open such an account when your child is born you’ll have about 18 years to fill it up, and even if you don’t start until later, every little bit counts.
Extra Tips for Successfully Saving for Your Child’s Education
Decide on a Monthly Savings Amount Upfront: Saving is not always easy, especially when you still have to consider your own retirement and everyday living expenses that still have to be met. That’s why a formal budget is crucial. It’s not a thrilling exercise, but you will need to sit down and take a long hard look at what you make and what you can realistically afford to save. Decide upon an amount that is to be put aside for the education savings account and then stick to it.
Don’t Dip Into it: The effect of compound interest means that any withdrawals will severely curtail the accumulated amount, so even if you did, damage will have already been done.
Have the Child Help: No, we are not advocating that you send your child off to work at ten, but the fact is that most teens do get a part time job and often without being nagged too hard to do so. Pocket money only stretches so far and by the time they are teens they more than understand that having a job will give them more cash to spend.
However, they do need to learn the value of saving as well, so you would not be a monstrous parent were you to suggest that they put some of their wages into the education savings account too.
Research Scholarships and Bursaries: We’ve already established that tertiary education is not cheap, but why pay more than you really have to? There are still scholarships and bursaries out there to be taken advantage of but you’ll need to begin looking before your child’s last year of secondary education if you want the best chance at getting them.
Saving for your Child’s Education is quite doable, perhaps the most difficult part is getting started. Talk to one of our Financial Advisers to find out the best route and start making plans now.
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