Saving for your child's education

Saving for your child's education

With the rising cost of education in South Africa it is vital that parents save for their children's education. Here are a few tips to help you save.

Saving for education
Saving for education/ iStock

With the rising cost of education in South Africa it is vital that parents save for their children's education. Here are a few tips to help you save.

One of the top reason students drop out of tertiary institutions is because of a lack of funds. Education, especially tertiary education can be very costly.

If parents are not financially well-prepared, they might find themselves needing to take out loans to fund their children’s education or expect their children to take out loans. Worst case scenario is if the student gets rejected for student-aid or a bursary, this might mean the end of their tertiary education.

But with proper planning, this can be avoided.

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Jeffery Sibanda, a Financial Advisor based in Gauteng shares tips on how to save for your child's education.

Start saving now
The first tip is to start saving as soon as possible. Parents might make the mistake of thinking they still have a long while to go before they need to save for their children’s education, especially when the child is still young. But Sibanda says parents should start saving "before the child is born or worst-case scenario as soon as the child is born. Do not wait till the child is 17 years to start saving for tertiary," says Sibanda.

He warns that most parents "think about education planning when the child immediately starts school or is a year away from university". This might lead to them being financially under-prepared.

Use the right saving vehicles
There are different ways to save for your child’s education.

Your options include "tax-free investments, unit trusts and endowments” among many others says Sibanda. It’s imperative that you speak to a registered and accredited financial advisor to ensure you find the best saving solution for your budget and needs. Different saving methods have different tax implications and charges which might not be suitable for your financial position and speaking to a financial advisor will help you understand what works for you.

Don’t choose a policy or saving method blindly without doing due diligence.

Mistakes to be avoided
Sibanda says parents should stay away from “withdrawing savings meant for education for their personal use.”
He says you should also avoid making too many withdrawals. Instead withdraw what you need for your child’s year of study and leave the balance to facilitate more growth.

Sibanda adds that parents should do research on the tax implications of various products and ensure they speak to their financial advisor about what they can expect.

DISCLAIMER: The information contained in this article is of a general nature and intended as a guide only. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial issue. Individuals must not rely on this information to make financial or investment decisions. Before making any decision, we recommend you consult a financial planner or advisor to consider your financial situation, needs and objectives.

Main image courtesy of iStock/ artisteer

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