Raising a child is no joke, not on your time nor your wallet. When speaking to other parents, the biggest burden I hear about is saving for their child’s education. It’s a large expense. So, on the insistence of a good friend of mine, I’m going to share my personal tips on this.
First, save for your retirement before you save for your child’s education. You may think I’m going off on a tangent here, but hear me out. You can’t assume you’re going to die young, or that your children will look after you when you’re old. You need to look after yourself. There’s no safety net for this.
We live in South Africa. However, your child can get a student loan at university and, depending on their needs, they might do just fine at a second-tier school.
Naturally, if you can afford to send your child to a private school, do it. But – only if you’ve already put enough money away for your retirement.
Second, start saving for this as early as possible. Don’t wait for pre-school. Go get some quotes of pre-school, primary and high school costs, present value them, and get that monthly number.
If you want to be completely safe, add some extra fat for school clothes and extra-mural activities each year. If you start early enough, you could probably aim to finish contributing to this fund by the time your child finishes primary school and let the lump sum work for itself to pay for high school. Now that you’ve eased your cash flow up a bit, you can start thinking about university fees.
But – only if your retirement savings are looking okay. If not, rather add to that. There’s nothing wrong with student loans. It makes your child take their studies a little more seriously.
Finally, be careful of paying school fees upfront at the beginning of the year. Attending an information evening before our daughter started Grade 1, we were informed that if we paid the full fees upfront, we’d get a R500 discount.
Did I hear right? R500? If you’ve managed to save up a full years school fees, you’ll earn more than R500 in interest that year if you rather pay monthly. Be smart about it.
Author: Gizelle Willows CA(SA) MCom Finance is Senior Lecturer in Financial Reporting at the University of Cape Town