3 Financial Planning Tips For Parents
Many parents think they should start saving for university when, in fact, financial planning should start when you fall pregnant.
Published: Tuesday, March 21st 2017
With another school year already in full swing for thousands of South African learners, it's important for parents to have started financial planning in order to secure their child’s educational journey.
According to the SA Frugality Report of May 2016, only 21% of the respondents surveyed found the idea of sending their children to cheaper schools as an attractive option for saving money. Most people, it seems, understand the importance and value of a good education, despite the escalating costs of education.
Mark Lapedus, Divisional Director at Liberty Investments says the money that parents spend on their children’s education can easily be one of the family's biggest expenses. While most parents prioritise saving for tertiary education, the truth is that saving for the foundation phase of your child’s education is just as important. If not more so. Consequently, preparing for your child’s education should start as soon as they are born.
“The sooner you start saving for your child’s education, the more time the money will have to grow."
The Power Of Compound Interest
"If, for example, you saved R200 a month for seven years, your savings would be worth R16 800 at 0% growth. If, however, the investment grew at 10% a year, then your total return would be R24 800,” says Lapedus.
School fees increase by about 10% a year and, with that in mind, checking in with a financial adviser is a good place to start.
3 Financial Planning Tips For Parents
Boitumelo Mothoagae, Financial Adviser at Liberty offers the below tips to assist parents in putting together a solid plan towards saving for your child’s education at different stages:
1. Start Saving During Your Pregnancy
When it comes to financial planning for your child, it would be wise to start saving during your pregnancy. While it might seem like you’re jumping the gun, once you find that you’re having a child, there may be many things you will need extra money for once your little one arrives. Like an unexpected trip to the doctors’ office.
Equally, you could do yourself a big favour by investing and putting a small amount of money away every month towards your child’s education. By the time they start primary school, you will have saved enough to give your child a fulfilling, memorable, and, most importantly, excellent primary school experience.
2. Stay Disciplined And Enjoy All That Interest
It is very easy to become distracted when saving for a long period of time. You can, however, find comfort in knowing that compound interest is working in your favour. Considering that, in seven years’ time, high school fees at a ’Model C‘ school will cost around R35 400 a year; or R216 000 for all five years.
An average priced private school will set you back approximately R540 000 for five years. It is essential to start saving for your child’s education at an early stage to ensure that the money can mature as your child grows.
3. Are Your Goals Realistic?
Whilst having big dreams for your children and their education is encouraged, saving and financing their education requires a more realistic approach. The amount of money you can save; the amount of time you have to save it, and the different institutions that you hope to send your child to, are all factors that need to be considered when saving for your child’s education. Fortunately, with the help of a financial advisor, you will be able to get the best advice regarding all of the above. As well as where to invest your money to ensure the satisfactory growth of your investment.
“Saving for your child’s education shouldn’t be a daunting task. If you start planning early, this will help you to avoid taking out loans that may take you years to settle,” concludes Mothoagae.
Have a financial question you're too shy to ask your friends? CLICK BELOW to Ask The Guru and receive an expert response within one working day.