Education is one of the biggest financial commitments parents may face. From school fees, uniforms and textbooks to tertiary education, the costs can add up significantly over the years.
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For South African parents, starting an education fund early can make the financial responsibility more manageable. The key is to set a realistic goal, invest consistently and review the plan as your child’s needs and circumstances change.
The Financial Sector Conduct Authority (FSCA) encourages South African consumers to set financial goals, build savings habits and make informed financial decisions. It also recommends seeking advice from an authorised financial services provider when making major financial decisions.
Start by setting an education goal
Before choosing an investment, work out what you are trying to pay for.
Will the fund cover:
- Private school fees?
- Public-school expenses?
- University or college tuition?
- Accommodation and living expenses?
- Books, technology and transport?
- A combination of these costs?
Establishing a clear target will help you determine how much needs to be saved and for how long.
Start as early as possible
Time can be an important advantage when saving for a long-term goal. Starting when your child is young gives your contributions more time to potentially grow. It can also allow you to spread contributions over many years instead of trying to find a large amount of money shortly before your child starts university.
The earlier you start, the more manageable regular contributions may become.
Work out how much you can afford
An education fund should fit into your household budget. Review your income, regular expenses, debt repayments, emergency savings and other financial commitments before deciding how much to invest each month.
Even a modest monthly contribution can establish a consistent savings habit. You can also increase contributions when your income rises, rather than waiting until you can afford a large lump sum.
The FSCA identifies improving household financial resilience, building savings habits and making informed financial decisions as important areas of consumer financial education.
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Be aware of inflation when setting your targets
The amount education costs today may not be the amount you need in the future.
School fees, university tuition, accommodation and other education-related expenses can change over time. For this reason, parents should avoid simply taking today’s fee and assuming that the same amount will be sufficient years from now.
When setting your target, consider how costs could change during the period before your child needs the money.
Keep education savings separate
Consider keeping money intended for your child’s education separate from everyday spending. Having a dedicated account or investment can make it easier to track progress and reduce the temptation to use the money for unrelated purchases. Automating a monthly contribution can also make saving more consistent.
Always get professional advice when necessary
Investment products can be complicated, particularly when tax, risk, fees and long-term financial planning are involved.
The FSCA advises consumers to consider obtaining financial advice from an authorised financial services provider before making major financial decisions. Consumers can also check whether a financial adviser is authorised to provide financial services.
Parents should understand the fees, risks, withdrawal conditions and tax consequences before investing.
Planning for your child’s education does not have to begin with a large amount of money. Starting early, contributing consistently and choosing investments that match your timeframe can help you work towards a long-term education goal.
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