For most parents, being able to educate their children is one of their most important financial goals. But when it comes to finding the money for school fees or tertiary education, we wish we had made better plans earlier.

We are reminded of this every January when we fork out money for school or university fees.

It is time to put a plan in place and priortise education savings. This may mean not buying a new car or forgoing some other luxury – but when it comes to our children, there is no sacrifice we are not prepared to make.

There are various savings options depending on what your goal is and how long you need to save for.

Next year’s school fees

Make a commitment now to start saving so that next January you can pay the bulk of your child’s fees upfront. You may also qualify for a discount on upfront payments.

An appropriate account would be a bank savings account or money market fund. Check with your bank what savings accounts they offer that allow regular monthly contributions at a decent interest rate.

You can set up a scheduled payment so that the money is transferred automatically each month. My preference is a savings account or “pocket” linked to my main bank account that I can transfer via my banking app.

This even allows me to name the account which reminds me that the savings account called “school fees” is only to be used to pay those fees. This is also a good way to save for those ad-hoc school expenses like school tours, uniforms and stationery.

Another option, if you have an access bond, is to pay extra into your mortgage each month. This has the advantage of reducing the outstanding balance and therefore you pay less interest. You can make a withdrawal of those pre-paid funds when the school fees become due.

University in less than five years

If your child is in high school, you need to start putting money away for their tertiary education.

Given the relatively high interest rates now, a fixed deposit that allows you to contribute each month could be a good option. For example, Capitec has a multiple deposit fixed-term savings account that pays over 7% for balances higher than R10 000. The longer the fixed term, the higher the rate.

One could also consider a low-risk unit trust fund such as one of the FNB Horizon Series funds. These are low-cost investments which can be opened on the FNB banking app. A minimum monthly contribution of R300 is required.

The FNB Multi Manager Income Fund invests in low-risk assets such as bonds and cash. and is appropriate for investments for up to two years. The FNB Stable Fund of Funds aims to deliver 2 percentage points above inflation, and is appropriate for investments of three to five years.

Longer-term savings for university

With education costs increasing at a rate well above inflation, you need to make sure your investments keep up.

This means that if your child is more than five years away from entering tertiary education, you need to take some level of risk by investing in equity-related investments. A good option would be a balanced unit trust or exchange-traded fund that has exposure to a variety of assets including local and international shares, bonds and property.

The Satrix Balanced Fund would be a good example of a low-cost fund which has low minimum contributions. In the FNB Horizon Series, the Moderate Fund of Funds would be appropriate.

Student loans

If you have not saved sufficiently for your child’s tertiary education, you could consider a student loan.

This is a far better option than taking on other forms of short-term debt because student loans are usually offered at the prime lending rate.

The bank will consider a repayment option where you are only required to pay the interest portion until the student finishes studying.

Banks typically give a grace period of six to 12 months once the student has completed their studies before full repayment is needed.

The catch is that as the parent, you must stand surety and the bank will consider your credit record and affordability. You need to make sure you are not overindebted and have settled other short-term debt.

This article first appeared in City Press.