How to give your child the best education
Determine how much you need to save
Start by understanding approximately how much you need to save. Will your children go to public or private schools, and are you going to set money aside for tertiary education? Combined, primary and high school fees for a single child could cost you in the region of R400 000 for a public school and over R1 million for a private school over 12 years. Besides from school fees, there are associated costs such as uniforms, stationery, textbooks, computer hardware and software and extra murals.
Where should you save?
The savings options are endless, from education insurance policies to share and unit trusts, savings accounts and trusts. Here are a few options:
Education insurance policies
Many financial institutions offer these policies, which are often also invested in unit trusts. These policies will pay for a child’s education should you become severely ill, permanently disabled or pass away.
The Fundisa Fund, managed by Coronation, Investec, Old Mutual and Stanlib, is a government initiative. The fund is similar to a unit trust and is invested in government bonds and bank deposits.
Investing in shares will make you part-owner of a listed business. You hope that the value of the company’s share price will rise over time, and often twice a year dividends are paid out to shareholders. Investing in shares can be risky though, as you are not assured that the share price will continually rise.
A unit trust is one of the best ways to invest in your children’s future. It is a collective investment scheme, meaning that many people pool their money in a fund, that then buys and sells shares, cash or bonds on their behalf.
A savings account is probably the simplest type of account available that is used to deposit and withdraw money. There are very few, if any, qualifying criteria to open a savings account and you won’t risk the volatility of the share market.
If you plan to transfer large amounts or assets to your children, consider setting up a trust. Setting up a trust is highly specialised and an expert must be approached to discuss the benefits and disadvantages.