Cape Town - Research indicates that it costs around R90 000 a year to raise a child, according to financial planner Sydney Sekese (CFP®).
On a straight line projection - that is with no inflation or growth - that’s over R2.7m by the time the child reaches the age of 23.
Sekese compares the cost of raising a child to having a second bond on your home. This is because raising a child is a long-term commitment that could last 23 years or more - including starting a first job.
"Raising a child is not cheap or easy and one must have a solid financial plan in place to ensure that you can give your child the best life possible and prepare them well for adulthood," says Sekese, who was the Financial Planning Institute’s Media Award winner for 2016.
The monthly costs to be factored in depend on the lifestyle, household income, money management and attitude of the parent. The main costs involved are education, clothing and after-school activities such as ballet classes, playgroups and soccer clubs.
For those parents who can afford it, the entertainment expenses of those various gadgets and toys need to be factored in as well.
"Most parents are ignorant of the various expenses of raising children. Having a plan in the form of a budget is a great way of managing expenses to ensure that parents are living within their means," says Sekese.
A practical way of monitoring this budget is to create envelopes for each of the major expenses and stash receipts for review at the end of each month. If for example the food envelope tends to bulge each month, it means the parent is over-spending on food.
As for education costs, it is estimated that three years of university education will currently cost R300 000 to R350 000 for tuition, books, room and board and other expenses such as a computer, cell phone and internet access. This could be projected to cost R1m by the time a six year old attends university.
This equates to roughly a R3 000 per month investment, assuming a 6% return and assuming the child is currently six years old.
Handy tips for school expenses:
Eunice Sibiya, head of consumer education at FNB, says preparing for the new school year may be daunting for parents who have overspent over the festive season. Therefore making financially smart decisions when preparing for the new school term can help you get through the tough month of January.
Don’t automatically buy everything new
“Rather than heading straight to the store, go through all the stationery and school uniforms you still have at home,” says Sibiya. “Take time to go through all the left over items from the last school year such as files that can be recovered and reused, pencils, pens and rulers as well as school bags and last year’s lunch boxes that may just need a good wash.”
Chat to other parents and find out if they have any school items that they don’t need, or would consider swopping items. For uniforms, make use of the school swop shops.
Purchase school supplies smartly
Rather than buying school supplies all in one go, consider spacing it out during the year. Not only will it help parents get through the difficult January month, but it can also give parents the opportunity to make use of deals throughout the year.
“Online platforms usually have a wide variety of items such as stationary online, where you can choose the most cost effective options,” says Sibiya. “Shopping online also prevents impulse buying as it is easier to stick to a list.”
Don’t forget those rewards and vouchers
This is the perfect time to max out any rewards programmes you may subscribe to. Use rewards programmes to purchase discounted vouchers for various retailers. Alternatively, if you have unused gift vouchers lying around, make them work for you by cutting down on your school supply spending.
Plan ahead for the rest of the year
Request the school calendar and start a budget now to avoid last minute costs.
“Plan for additional spending that is required around a sporting season, school tours and school activity expenses.
Based on this, decide on an amount that can be set up as a scheduled transfer to your savings account at the beginning of each month. On top of having peace of mind that there are funds available, your money will also grow, thanks to compound interest.
“There is no reason to be caught off-guard when it comes to the expenses that seem small relative big expenses such as school fees. A bit of budgeting and smart savings techniques such as the above can go a long way,” says Sibiya.