It’s not that the parents don’t recognise the value of education; it’s simply that with so many items to save for and with the cost of higher education now so expensive, saving enough can seem difficult.
A recent study revealed that spending on education in Africa is expected to grow to $740 billion by 2030, at a 14 percent compound annual growth rate, reaching $57 billion by 2030.
Investing in your children’s future is one of the most important financial decisions you can make as a parent. The cost of education continues to increase, but schooling is still the best option in terms of securing a bright future for any child.
A good education equips them with skills and prepares them to face the challenges of life. However, in order to ensure your children get the best education comes at a very high price and requires financial investments and planning well in advance and the later you leave it, the more you will have to save.
Plan early
Saving up for school fees is very similar to saving up for retirement. You build up the funds over a period of time and then gradually draw down on them. Because you do not use the funds all at the same time – you pay fees over a period of time – it is important you manage your funds optimally to give them the best chance to grow.
To plan your finances you need to look at how much you need to pay and when. How old are your children? Do you want to fund their entire education or just secondary education and/or university? Will you pay by the year or term?
You might only have three to four years to save and in that case, your risk approach would look different as you need to look at higher-risk investments.
If you have time on your side, you may want to consider a more aggressive investment approach to start off with. As you get closer to the time for your child to leave home, however, you will need to strategise around your risk approach.
This could mean taking some of the cash and placing it into a more conservative investment to buffer against any potential market volatility.
Investment vehicles to consider
The financial services sector has focused on rolling out new and different kinds of savings products to cater to the growing needs of parents to provide ways to cover their kids’ school and college expenses.
There are specific education plans that are structured for parents' savings needs. Educational policies enable you to build a fund over a period of time, making suitable provisions for the child’s school/college fees requirements as to when they are required.
And in some cases, it also ensures that the fees required are still available even in the untimely death of the policyholder during the term of the policy.
Educating your child presents many financial challenges and it is difficult to forecast with complete accuracy on the exact costs associated. It is therefore advisable to consult an advisor to specifically address the objective and to map out an investment plan to achieve that goal.
If you want to put down a lump sum now, you should look at portfolio management advice. It could be useful to invest in a well-diversified portfolio of investment vehicles. It is important to note that these vehicles are all linked to risk.
Depending on whether you are cautious, balanced, or aggressive, there will be different funds and different plans for each of those types of profiles.
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