Save more for a better tomorrow

2010-07-17 09:33

Parents whose children are born this year face a likely R400 000

per annum university bill when their bundle of joy needs tertiary

education.

Financial advisers forecast that the current R25 000 a year higher

education tuition fees will increase to about R400 000 in 20 years, mainly

because of inflation. This means that apart from winning the lottery, a more

prudent way to send your child to a tertiary institution is through

saving.

Anil Jugmohan, an investment ­analyst with Nedgroup Investments,

says: “It is important to plan ahead and save money towards your child’s

education. It should be part of a ­comprehensive financial plan and must start

as soon as possible.”

Jugmohan says young parents often overlook a savings plan for their

children, believing that they can ­always make a plan at a later stage. He adds

that parents should consider saving through the Fundisa Fund – a joint

initiative between the government and the unit trust industry.

This joint initiative aims to encourage and incentivise individuals

to save for a child’s tertiary education by supplementing contributions with

additional funds. For every R40 a parent contributes to the fund, the government

contributes an additional R10 – up to a maximum of R600.

“In this way, you are guaranteed a 25% bonus on your contributions.

In addition, the money you invest as well as the bonus from the government is

likely to earn further interest,” he says.

Old Mutual warns that there are ­issues to consider when embarking

on a long-term investment plan. But by following investment principles, parents

can secure their children’s future.

Andrew Ruddle, investment products manager at Old Mutual, says

­various insurance companies offer a range of savings products which cater for

all types of personal situations and savings targets.

He adds that starting to save money sooner allows it to grow faster

and is cheaper than starting late. “There are no shortcuts, you simply need

time.”

Ruddle advises parents to consult a registered financial adviser or

a broker. “An adviser (or broker) will assist in compiling a holistic financial

plan that meets requirements of an ­individual.”

A well-planned higher education savings plan holds all the answers

to seeing more and more students graduating at tertiary level. Currently, only

15% of students graduate, making SA one of the countries with the lowest

graduation rates in the world.

A study by SA Labour and Development Research Unit, compiled last

year, showed that graduates earn on average between 2.5 and four-times more than

those who do not complete tertiary schooling, and are three times more likely to

get a job.

 

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