The end of the year is upon us it is easy to get swept up in the holiday craze. Stores are encouraging overspending with great deals, you’re spending on end of year celebrationChristmasass gifts, local or international holidays and not really thinking about the obligations of the following year, which is right around the corner.
Looming over many parents is the cost of their children’s school and tuition fees for next year. While families have a number of financial commitments to attend to every month, this is the time of year where school funds are often moved to the top priority to ensure that the family is financially prepared for the expenses accompany a child’s educational needs for the year.
Saving for a child’s education requires careful consideration and proper planning and spending your money wisely during the festive season can be a big boost come January. If you’re looking for ways to prepare yourself for next year’s school fees obligations then check out this guide. Below are some tips for parents to ensure that they have planned appropriately for their children’s education costs.
1. Start early
Parents should start saving for their children’s education as soon as they possibly can. Many people do not consider, or are not aware of, the great advantages of compound interest, and how accumulated savings grow over several years when invested properly.
By investing from an early age, parents will eliminate the financial worry of not having sufficient funds to give their children the best education possible, as the funds in their investment will grow every year. Giving yourself a 6-year head start when saving for your child will make all the difference especially considering you’ll probably have a long schooling career of 12 – 16 years to account for.
2. Automate savings
The best way for parents to ensure they are regularly contributing towards their children’s education is to open a dedicated savings account and set up a monthly debit order. This way the parents will automatically save money every month towards this cause. However, for this to work there has to be a strict rule in place to never withdraw any money from this account if it is not related to the child’s education. If you have spare cash laying around, look at adding some or all of it to your child’s education fund, education only becomes more expensive each year and skimping on your savings will only leave a larger shortfall on your bill each year.
3. Explore ways to get discounts
It is advisable to do some research and contact schools to find out whether they offer financial incentives that could result in long-term savings. Many schools offer a discount if the fees are paid as a once-off amount in advance. Some also offer a reduction when there is more than one child attending the school. These types of savings can make a big difference over an 18 year period.
4. Include education funding in the financial plan
Education inflation is higher than the inflation rate and a savings account or money market account won’t have good enough returns to keep up with it. You will need to look at options that provide a better return on investment.
It is important that parents include education funding in their overall financial plan. These expenses have to be accounted for as part of the monthly household expenses to determine how it will affect the family’s overall financial position. When it comes to developing financial plans, it is usually a good idea to consult a reputable financial planner who will be able to develop a solution for the client to ensure that they can have provided sufficiently for their children’s tuition fees and related education expenses.
With the cost of education increasing every year, parents are faced with increased expenses for the privilege of sending their children to school. School fees are a big financial commitment, but with the right advice, families do not have to see this expense as a financial burden.
5. Look at Tax-free investments
Being properly prepared for your child’s education means you need to diversify a portfolio. Have a general savings account to get started, then moving those funds into other investments like tax-free accounts. unit trusts etc.
6. Save your bonus
We know it the end of the year and you’re counting on that bonus for extra goodies, but many of us can live without it and a bonus should not be accounted for as planned spending. A bonus can be used to kick-start that education saving fund or cover you temporarily as a decent deposit on your kids’ education.
7. Invest in the fundisa government fund
Open a fundisa account, a Fundisa Fund account, offered by the government, depends on what you want to gain from the investment. To receive the maximum bonus of R600, the investor will need to save R2 400 in total in that year. The bonus money does not belong to you – it can only be used by the learner whose education you are saving for. If you need to take money out of your Fundisa Fund account you may do so, but then you will lose the 25% bonus you would have received.
8. Take out life insurance
I know many of us don’t want to think about this but you may not be around to pay for your child’s education. Taking out life insurance to make sure you cover your child’s education obligations is not only a smart option, its absolutely essential to make sure you’re covered for the unexpected.
Manage your debt effectively
If you still need help with your savings and you’re feeling overwhelmed by your current financial situation, feel free to contact us. To Speak to one our consultants about debt review contact us here.