By Dominique Bowen
If you’re a parent, or plan to have a family one day, chances are you’d like to be in a position to offer your children everything that will equip them to live independently and successfully. In the global competitive marketplace, this means ensuring your child has access to the secondary and tertiary institutions that will give him or her the grounding to embark on a rewarding, fulfilling career.
“A quality education can ensure that your child not only has a better chance of finding employment, but typically a person that is qualified will also earn more,” says Mayur Lodhia, head of retail savings and income at Old Mutual.
He says the challenge of being able to afford quality education is largely linked to education inflation. “Education inflation is higher than normal inflation by between 2% and 3%,” he says. “So, if one assumes that you get inflationary salary increases every year, and education inflation is higher than your salary increases, it means that the portion of your salary that you would need to spend on monthly tuition fees gets bigger over time.”
Supposing your goal is to put your child through 12 years of primary and secondary schooling and three or four years of tertiary studies, you need to plan (and save) for at least 15 years of tuition.
A 2022 tertiary fees snapshot
Saving for education is bound to be one of the bigger items on your monthly budget, but just how big are we talking? There’s quite a wide-ranging sliding scale, depending on the career your child would like to pursue, the academic programme structure they need to follow to qualify, and whether any bridging or additional courses are compulsory for them to graduate.
Here is an overview of ballpark tuition fees to consider when setting your (inflation-adjusted) savings goal to pave the way for a bright future for your child. The figures are illustrative, based on current fees schedules from UCT, UWC, Wits, UP, SAE Institute and The Animation School.
Commerce and finance. If you have a budding accountant, actuary or entrepreneur under your roof, you’d be looking at spending, on average, between R50 000 and R90 000 to put them through their first year of tertiary studies.
Law, engineering and architecture. Wannabe legal eagles could set you back anywhere between R44 000 and R67 000 on average, while the average of first-year studies in engineering and the built environment can fall between R53 000 and R76 000.
Media. Could your child create the next Avatar or Spider-Man movie? For the first year of a three-year diploma in digital animation, you’d have to budget about R80 000, while sound engineering can come in at R90 000.
Social sciences. Social sciences and arts degrees have a range depending on a student’s choice of subject focus, but you’re looking at anything between R40 000 and R60 000 to get them through their first year of learning.
Medicine. Pursuing medicine can cost you between R54 000 to R74 000 for year one, depending on the institution, and R62 000 to R72 000 for aspiring dentists. To get your budding occupational therapist through their first year, you’re looking at between R56 000 and R76 000 for year one, and for physiotherapy, it’s between R52 000 and R61 000.
How much time do you have?
“The most important ingredients of success are to start early, remain consistent with savings and to not access the money or react emotionally to short-term market movements,” says Lodhia. He recommends deciding on a set amount per month that will get you to your goal, then putting it aside and forgetting about it. A financial adviser would take your current portfolio, tax situation and various other important personal factors into consideration in determining the right savings solution for you.
When it comes to your underlying investments, Lodhia shares a simple rule of thumb for selection: “The longer you have to save, the more you could invest in equities that are exposed to market movements; for shorter terms, money market-type funds may be more appropriate. The final fund choice will ultimately depend on your willingness and ability to take risk (exposure to market fluctuations).
“We have noticed that tax-free savings accounts (TFSAs) are becoming a popular vehicle, not only for education savings, but also other goals. With a TFSA, you pay no tax on the growth, and you are allowed to contribute R36 000 per year and up to R500 000 in your lifetime.”
Besides the obvious investments best avoided for a nest egg like education savings (hello, crypto), Lodhia says there is no obvious investment vehicle parents should stay away from. “If the solution gives you the most appropriate tax advantage, liquidity rules, and allows you to contribute in a way that suits your unique needs, you can confidently start investing,” he says.
PERSONAL FINANCE