Buy the gift of education

2010-11-27 00:00

WITH the December holidays edging closer, most people are already thinking about what to buy their loved ones. However, with consumers still keeping a close rein on their purse strings, this festive season is a good opportunity for South Africans to consider longer-lasting gifts for their children.

A recently published festive season spending survey by Deloittes showed that 62% of South African shoppers indicated they would spend the same or less than they did last year over the holiday season, while 78% said they would not buy on impulse.

According to Anil Jugmohan, investment analyst at Nedgroup Investments, one of the best presents one can offer their child is a good education. “By allocating a portion of your holiday and festive season spending money to a savings or investment fund for your child’s education, parents are offering one of the most valuable gifts there is.”

Jugmohan says parents should consider all the various saving options that are available to them. One way to invest in education this festive season is through Fundisa, a joint initiative between the government and the unit trust industry. It aims to encourage and incentivise individuals to save for children’s tertiary education by supplementing their contributions with additional funds.

“By investing relatively small monthly payments, the Fundisa fund can accumulate an attractive lump sum by the time the child is ready for university,” he says.

For every R4 that you contribute to the fund, the government and unit trust industry will contribute an additional R1. This additional contribution is limited, however, to a maximum of R600 per child per year, but investors are encouraged to put as much into the fund as they wish since it earns very competitive rates of interest. The government bonus also earns interest as well, explains Jugmohan.

“This becomes a very significant contribution in the long term and is one of the reasons that we support this initiative,” says Jugmohan.

Other savings vehicles that many parents consider are unit trusts, endowment policies and trust funds.

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