5 ways to prepare for your child's education
Be financially prepared for when your children need to go to school.
Piggy bank (Shutterstock)
Education has become critically important in South Africa. We all want a quality education for our children to prepare them for life in an ever-changing world. The monthly education cost fluctuates depending on whether your children go to a public or private school.
South Africans are preparing for the 2016 school year, having just received fees structures for next year, James McConnell, a Financial Consultant at Alexander Forbes, provides the following five funding options to guide parents in paying for your child’s education:
1. Monthly Salary
School fees, like a home loan, are paid from ones after tax money. Therefore, the more the fees, the more you have to earn. If there is only one bread winner in the family, this can be challenging.
2. Annual Bonus
Some people make use of their annual bonus to pay for school fees every year. By paying the fees in advance you could also get a discount from the school.
Using a loan to pay school fees is not ideal as you could still be paying off school fees after your children have left home. Given the already high levels of debt facing most South Africans, using credit to finance education is not a great idea and it could actually hinder the parents’ ability to save for the future or worse, towards their own retirement,"" adds McConnell.
4. Education Plan
An education plan is an assurance product, we must use the most appropriate savings product for our circumstances taking into account our tax rate, earning ability, time duration, risk appetite and liquidity requirement. The type of education savings plan you get will depend on how much you can invest every month.
As children grow and excel in academics or sport, there comes the possibility of them qualifying for scholarships.
"You should ideally start saving from the time you decide to have children, and you will need to save as much as your disposable income will allow," says McConnell.
He adds, "Speak to your accredited financial adviser to do the calculations and determine which savings product is the best for your children’s education plan. A financial planner can show you where you can get a bit of breathing space in your finances by going over your current cash flow versus your expenditures, and can also recommend how you can make changes that can, for example, see you paying cash for a child’s textbooks or iPad without taking on credit." concludes McConnell.
Press release on behalf of: Alexander Forbes Financial Planning Consultants