Saving for your children's tertiary education

I have a 13-year-old daughter who is keen to study further after finishing high school. I'm concerned about paying for her university fees though. Given the cost of South African universities these days, what is the best way to save for university fees? I also have a six year- old son; what's the ideal age to start putting money away for his tertiary education?

There are, in fact, two situations that could arise as you consider the best possible solution in saving for your daughter's tertiary education. 1. There is a possibility that you pass away or become disabled prior to the time your children's education needs to be paid for. This needs to be planned for. Here the solution is to calculate the approximate capital value of maintaining and educating your children until say the age of 21 and then take out death and disability cover for this value. Your financial adviser will help to calculate this amount. 2. But there is every chance that you would be able to continue working and set aside savings to fund the education. In this case one would use the current cost of an average degree, and set this amount adjusted for assumed inflation as a target for a savings. Again, your financial adviser would assist in these calculations. The financial service your adviser would consider and propose to you would depend on the monthly contribution, the costs of the investment (including the planner’s fees). The solutions would possibly be unit trusts, endowments or a direct share portfolio. In all cases a balanced mix of equities, property and cash invested both on and offshore would be considered. There are a large number of variables to consider in addition to the age of your children. For example: you would need to make assumptions about the actual degree they are considering and what the length of the study would be. Also, would you want to provide for post graduate studies, Masters or Honours? Will the child be staying in residence or at home? Which university will be considered - the fees vary. Your financial planner should use a set of assumptions and then meet with you each year to adjust the plan as these various considerations are resolved. For a basic three year commerce degree without books and residence one could expect to set aside about R450 per month for 5 years (in the case of the 13 year old), and R250 per month for the 6 year old.
Gavin Came
BComm LLB CFP(r), Financial Consultant
Sasfin Financial Advisory Services



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