We all know that raising kids is never easy on one’s finances. From diapers to school stationery the money adds up and can be a great financial strain – especially for households with one salary coming in each month.
So when it comes to the thought of your children’s future education, it may seem unnecessary to think about when there are so many other expenses. But in reality, preparation for this is important.
The choices you make regarding your child’s education are crucial. But these choices can also be very costly. The average cost of a high school education varies greatly, and it also depends on the whereabouts of the institution and the type of schooling they provide. But the odds are that schooling your child will be pricier than you imagined.
You will most probably wish to give your child the best education you can find, but with surging fees, schooling can end up being a real financial strain. It has been shown by Stats SA that the education fees increase rate has risen above the rate of inflation.
Compared to average living costs, which have been rising by 7% each year since 1990, school fees have been rising by an astounding 13% each year. This increase per year has a significant impact on monthly household costs.
To put this into perspective, if, for example, your salary was R10 000 p/m in 1990, and your child’s school fees were R500 monthly, you would only be using 5% of your salary on education. So if your salary rose in correlation with inflation, your salary today would be R44 000 p/m, but giving your child the same schooling opportunity would have surged to R7 400 p/m. This is equal to 17% of your salary!
When kids are little, we understand that education is an expense, but we don’t take it into great consideration. We usually only think of fees as the expense, and forget to include the smaller expenses such as:
- School uniforms
- Electronics and Wi-Fi
To further your knowledge about schooling costs, it is recommended to speak to your financial advisor and to look at some websites of financial establishments; these usually have up-to-date information about education expenses.
The following list will also provide you with some up-to-date details regarding education- orientated expenses from fees to the price of electronics:
Public education from grade R to matric (if beginning school in 2018) can reach the expenditure of R450 000 to R650 000 for the 12 years of school. However this does not include other expenses like school clothes and other activities that can add up to as much as R12 000.
Private institutions can cost approximately 2.5 times more than public schools (up to R1 785 700). In 2017, it was estimated that a year of private high school fees costed roughly R124 000.
Preparing for educating your child
It is always advisable to begin saving money for your child’s education early on. At Cash Converters, we often advise parents to start saving from the time that their child is a baby so that you can allow your savings to gain interest over time.
Advice on saving for the future:
Starting from your child’s birth, you should save up to R1500 per month to save enough for a public education and a bachelor’s degree. However, if you want your child to attend a private institution, you will need to save around R3 800 per month.
Things to do to make saving easier
By strategizing about the future, putting money aside will be a lot easier. Following these tips will be a great help when saving for your child’s education:
1. Be aware of debt
It is not fair to complain about heavy school fees if you are spending vast amounts of money on superfluous things, for example, fancy cars or electronics that you bought on credit. The education of your offspring is much more important than the depreciating value of your brand new Toyota Hilux. If you move house, buy a new vehicle or start paying off new debts, always make sure that your child’s education is prioritised.
2. Make saving easy
When your salary increases, you should take the opportunity to create a debit order that takes 2% of your extra income into another account for saving purposes. You should increase this amount by 2% every year. In five years’ time, you will be putting aside 10% of your income towards savings.
You could also start saving a sum of money that rises a couple of percent more than inflation every year, but you should consult an advisor about this.
3. Make goals that are achievable
It is challenging to gather enough money to afford your child’s education (school or university) in the full amount. You should rather focus on saving money for the difference in the change in school fees versus your salary increase.
We also recommend that you be prepared for the difference in high school fees compared to primary school. High school can be up to 20% more expensive. Even some primary school fees rise from grade to grade.
4. Create a strategy for effective saving
You should send your child to a school that you are able to pay for with your salary. But when you child starts grade 1, you should begin increasing your savings by the amount that high school fees and primary school fees differ.
Through this method, you will be saving money that will help you through the annual rising of school fees. For example, if grade 1 fees are R1000 and grade 8 fees are R2500, you should be putting aside R1000 each month when your child starts school.
5. Create a fund for education
You should always be saving money for your children’s education unless you are in line for a large inheritance that will cover the school fees. To increase these savings, you should ask family and friends to contribute money towards education instead of giving them fancy and pricy birthday of Christmas gifts. Schooling is a lot more important than expensive toys.
6. Increase savings by investing
If you are saving money a few years in advance before you will need it, you should be sure to invest money with a company that will increase your profits faster than the rising of school fees.
You should maybe think about putting money in a fund that has exposure to real estate. Investing in a unit trust is a good idea and investments usually run from R200 – R300 a month.
7. Earn money through selling your unwanted goods
You can also save money by selling valuable items that you feel you don’t need. At Cash Converters we promise to give you the best value for your items that you don’t want anymore. Come by one of our stores to sell your goods to us. We will make sure that your valued items will go to someone that needs them.