Different educational savings for kids

This article serves as a follow up article to the How to make your kids rich article. Below are three different types of educational funds your can take out in order to save money for your children.

Unit trusts

Many people choose unit trusts for long-term investments as there is a lot of choice as well as funds that specifically focus on beating the rate of inflation by a certain percentage. This is important because education inflation is higher than normal inflation. Unit trust investments are ideal for people who require flexibility and access to the funds, however you must be disciplined and avoid the temptation of dipping into your child’s funds.

Savings policies

These are fixed for a certain period of time, for example between five to 15 years, depending on when your child will go to school or university.

You can either pay fixed monthly premiums or make a lump sum payment into the policy. You have limited access to the savings and generally have your savings invested in a wider range of the leading unit trust funds of your choice. You can also choose to invest in some of the available life funds that offer minimum guarantees.

These life funds are only available from life assurance companies. Many policies offer a protection of premiums in the event of the death or disability of a parent. This means if you were to die or be disabled and unable to work, the insurance company will pay the premiums for the remaining period.

Fundisa

This is a government initiative enabling you to save towards an accredited qualification at either a public college or university. You’re paid an annual bonus on the investment, which can be up to 25% of the money you save annually up to a maximum of R600 per child. If you save R100 a month (R1 200 a year), you will get another R300 a year.

To receive the maximum bonus of R600, you have to save R2 400 a year. The bonus can only be used by the learner. You can withdraw your own money but will then lose the bonus.