A recent study by Sanlam done amongst mothers with children aged between 3 and 15 shows that some parents go as far as holding down two jobs to put their children through private schooling, which they perceive to be the best legacy they can give their children.
“Our study shows that having the best possible education is the biggest dream that most mothers have for their children, regardless of their age or income. At the same time, one in four parents are not saving anything towards their children’s education, which means that these dreams may not be realised in future as the costs keep rising,” says Karin Muller, the head of Growth Market Solutions at Sanlam.
Muller says that for those who are saving, the survey found that most mothers invest between R200 and R500 per month for each of these needs: future schooling, extra-mural activities and/or their children’s nest egg. The survey also found that older mothers generally invest more in their children’s education than younger mothers – possibly because they have a higher income.
The survey also found that while the majority of mothers are optimistic about their children’s financial future, the middle-income group is less confident than the emerging- and upper-income groups. This highlights the financial pressure felt by the middle class who receive no financial subsidies from government but which are affected by rising living costs and increasing taxes.
While education is a priority for parents, figures released by Old Mutual illustrate the financial commitment needed to educate our children, given that education costs continue to rise well above inflation.
According to Jean Minnaar, Investment and Savings Manager at Old Mutual Emerging Markets, in 2016 one year’s education could cost between R29 000 and R114 000, depending on the level (primary school, high school, university) and type (private, public) of education. By 2021 it is forecast that parents will be spending between R45 000 and R176 000 for one year’s education (see table below).
If your child is starting grade R this year, the combined cost of education is expected to be R1 057 000 for public schools and R2 406 000 for private. This includes primary school, high school and a three-year university qualification.
For example, if your child is born in 2016, looking at the figures in the table and assuming 10% investment growth before fees, you need to save about R530 a month for university tuition (excluding accommodation, books and travelling costs). However, if your child is already 10 years old, this is about R1 050 (close to double). This highlights the benefit of starting early. But remember – these monthly savings will also need to be increased by 9% per annum going forward, to keep up with higher education inflation.