Education is one of the basic needs for children, and every parent’s dream is to see their children succeed. Many parents want to know when they can start and how much is enough, but the simple truth is; saving for a child’s education is a long-term goal.
The sooner you start the better, allowing you more time to grow your savings. You can always start with any amount that you can afford. Most people underestimate saving small amounts, they feel that it might not amount to much. However, if you invest a small amount over a long period of time, you can take advantage of the compounding interest (earning interest on interest) and you can be far ahead of someone who is investing more than you, but they invest 5 years later.
E.g: Thabo saved R500 per month and after 10 years he stopped contributing, he had already saved R60 000. If Thabo leaves this money for another 10 years, the R60 000 would have grown to R262 000. His friend, Trevor, only decided to start saving 10 years after Thabo had started. In total, he saved R120 000, but after 10 years, his money grew to R174 920.
There are various investments that can be used to save for children’s education, it’s advisable to seek help from a registered financial advisor, so you can understand fully and choose the right investment for your children. Investments you could choose from can be:
- Unit Trusts
- Tax-free Saving Accounts
- Endowments are often referred to as an education policy (only recommendable if the tax bracket is over 30%)
These investments are a great way to ensure that you can save for your child’s education while you are still alive, but there is also a question of what if I am no longer alive? Education protectors are normally offered by insurance companies to ensure that your child’s education will still be covered in the event of your death or disability. A financial planner will be able to assist with that.
This will give you peace knowing that you have ensured that your child will get the education that you wished for them, even in the event of death.
