Should your toddler be saving for college?

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While you still have 12 or more years of primary education to fund, it’s difficult to make the mental jump to the years when your child will require tertiary education to launch him or her onto a fulfilling and successful career path.

For many parents, meeting today’s bills – and that includes schooling for their children – eats up so much of their income that the thought of putting away a little a month now, for use so far in the future, may seem overwhelming.

It’s an indisputable fact that higher education in South Africa is expensive – and it’s increasing all the time, often at a rate faster than that of inflation. It’s estimated that currently only 15% of South African students graduate with their degree or diploma – and financial constraints is one of the key reasons for this.

Tuition fees at South Africa’s 23 universities are between R10 000 and R25 000 per year, depending on the degree. Throw in books, accommodation, transport and living expenses, and you’re looking at forking out anything up to around R300 000 for a four-year university stint. It’s been estimated that if your child was born in 2008 and will attend university in 2027, you’ll need R400 000 for tuition alone. And that’s for just one child.

Is it worth it? Yes, according to a 2009 study by the South African Labour and Development Research Unit, which found that South Africans who graduate are three times more likely than non-graduates to get a job, and earn up to four times more.

Those are the facts. Now, what can you do about them?

First, it really is important to start saving towards your child’s tertiary education now – the sooner, the better. One way to do this is to join the Fundisa unit trust fund, which was set up in 2007 as a joint initiative between the unit trust industry and the Department of Education. The minimum monthly investment is R40 – a realistic amount for even the most cash-strapped household – and an annual bonus is paid on top of the interest earned. Money invested in the fund has to be used to pay fees at a government-recognised higher-education institution. You can join the fund through Absa, Standard Bank or the Nedgroup.

There are, of course, other options for those for whom even R40 per month is too much to ask at the moment. A student loan, at the time your child begins studying, and usually at a relatively favourable interest rate, is one. Only the interest is due each month, and you should encourage your child to contribute towards these payments through holiday or part-time work.

But this still means that, once your child has that precious diploma or degree, they’ll begin their professional life with a student loan to pay off (or you’ll have to find a way to do this). So saving ahead makes very good sense.

Scholarships and/or bursaries are another way to solve the problem of paying for higher education, but the possibility of your child’s winning one obviously can’t be guaranteed. So digging that little bit deeper now is really worth it, so you child can reap the benefits of your financial forward-thinking when the time comes.

Have you thought about saving for your child’s education? How much do you save, and how?

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