
“Children are the rock on which our future will be built – the leaders of our country for good or ill; which is why the rich potential in each child must be developed into skills and the knowledge that our society needs to enable it to prosper” – Nelson Mandela
The education landscape has undergone a radical transformation over the past 20 years and while there have been programmes which have tried to narrow the gap between the different educational opportunities available, the reality is that this gap has actually become larger. With increased competition, not only in the workplace, but also for admission to tertiary educational institutions, the importance of being able to have access to the better education opportunities available is becoming ever-more important.
When you also consider that the rate of educational inflation has also outpaced CPI the challenge of being able to provide the best education opportunities becomes even greater.
Education lifecycle
While circumstances may differ, children in South Afrcia typically adhere to the following educational life cycle:
School Phase | Commencement age | Attending years | Grades |
Pre-school | 2 | 2 -3 | |
Preparatory | 5 | 8 | R/0 2 – 7 |
High School | 13 | 5 | 8 – 12 |
Tertiary | 18 | 3-5 |
This translates into about 18 years on education that needs to be funded.
A survey of the South African workforce revealed the following rather concerning statistics:
- 9% – employed women have no qualifications
- 11% – employed men have no qualification
- 25% – employed women have grade 12/Matric
- 29% – employed men have grade 12 /Matric
- 21% – employed women qualification > grade 12
- 18% – employed men qualification > grade 12
These statistics merely reinforce that with access to educational opportunities your children can be positioned to realise the benefits of joining the workforce with skills that are in demand.
Additional Educational Cost Components
As any parent with children of school going age will attest to, the cost of education goes well beyond the education fees.
Exactly what costs are incurred will depend on the educational institution as well the activities of the child.
These costs could include
- School uniforms
- Stationery
- Text books
- Aftercare
- Transport
- Camps
- Extra lessons
- Extra-murals
- Sports equipment
- Musical instruments or other items
To break this down into a bit more detail, the conservative costs associated with two common activities undertaken by students are listed below:
Rugby
- Rugby socks (depending on school) R65 – R95
- Rugby jersey (depending on school) R495 – R600
- Rugby shorts (depending on school) R200 – R300
- Rugby togs R330 – R750
- Scrum cap (junior) R120 – R400
- Vest (junior & senior) R265 – R400
- Gum guard (junior) R95 – R120
Ballet
- Leotard R495
- Ballet stockings (full length, winter) R340
- Ballet socks (summer) R120
- Ballet waist band R80
- Ballet shoes R430
- Ballet skirt R400
- Ballet cross-over jersey R580
These additional items can easily represent anything from 15% – 25% of the amount that you are paying in school fees.
Should your child follow tertiary studies they are still not earning an income and apart from the educational fees will need to be supported for the following costs
- Text books
- Accommodation (if they do not live at home)
- Transport
- Data and communication costs
- Entertainment/living allowance
What does it take to raise a child.
While many estimates have been done to calculate the cost of raising a child, they all have a the same result – it is very expensive.
The table below show one such estimate by 24.com
The education cost of R750 000 is obviously dependent on the school system selected with costs of attending private schools going as high as R2.5 million and even beyond.
Funding Considerations
When considering options of securing the best education for your children there are two scenarios that need to be considered
- How will you be able to have sufficient funds to pay the fees and
- What would be the situation where something were to happen and you are no longer able to earn an income e.g. you are affected by some diability or even pass away.
While educational fees start to be incurred at what seems to be an ever younger age, most parents are concerned at being able to provide their children with the best education at a tertiary level or even at a secondary level. The importance of parents starting to save as soon as is possible cannot be emphasised enough, as it is only through having for as many years as is possible to grow an investment will their objectives be realised.
Funding options
A number of financial institutions advertise educational saving options; however, these are usually a ring-fenced investment which still invests in the traditional collective investment schemes etc. As every person who has a South African ID number is able to invest in a Tax-Free Savings option, which includes children, while the annual amount is limited to R36 000 per year, this should probably be your first choice.
There are a number of other options depending on your personal circumstances and objectives. These include flexible investments, endowments etc. and through Momentum you have access to hundreds of local and offshore funds. Please speak to me to ascertain what sort of investment will be required to be able to fund your child’s secondary or tertiary education.
Securing your educational commitments
Having regard to the importance of being able to fund your educational commitments, serious consideration should be given to taking insurance should something happening to you that will result in you being unable to fund these commitments.
Momentum have an excellent product called the Education Protector which pays a specified annual amount (up to R120 000) until your child reaches a certain age.
The term of the benefit is calculated as the difference between the child’s education cease age and the child’s age next birthday (at the start of the benefit), subject to the following limits:
− Minimum – 10 years.
− Maximum – 24 years.
You will receive your premiums back at the end of the benefit term if you have never claimed and the benefit is still in force.
Only one child is allowed per policy so if you require cover for more than one child, each will have a separate policy. This will allow you to specify the annual amount and term required for each child.
There are 3 versions of the Educational Protector benefit:
– Educational Protector – Death Pays on the death of the life insured
– Educational Protector – Death or Disability. Pays if the life insured dies, is permanently disabled or meets the requirements of one of the defined functional impairment claim events with a 100% payout
– Educational Protector – Death or Impairment. Pays on either the death of the insured life or meets the requirements of one of the defined functional impairment claim events with a 100% payout.
Conclusion
As educational costs comprise an ever increasing proportion of a family’s budget and given the increasing importance of being able to give your children the best education possible, special attention need to be given to this issue.
In the absence of access to trust funds or ownership of a good business, it is only with a clear plan that is executed will parents be able to have some peace of mind that they will be able to give their children the best start to life.