Financial solutions to the soaring cost of education

We wrote extensively last month about our youth and how vital their contributions will be to our future economy, but one important issue that still needs to be touched on is that of education, as without a high level of education they will not be an effective workforce for SA’s future anyhow.

It is with some alarm that we observe, through various reliable sources, that the cost of education in South Africa is soaring. Just one report estimated that the parents of a child a starting Grade R in 2017 could expect to have paid between R1.3 million and R3 million, depending on whether they attend public or private institutions, by the time they attain a three-year degree from a university in 2033!”

This is a lot of shekels, particularly at a time that people are so cash strapped from setbacks like COVID-19 and the resultant job losses and market slumps. Stats SA research, just looking at increases between 2019 and last year, showed that “Primary school fees increased by 7.3% in 2020 compared with 6.9% in 2019. High schools fees increased by 7.6% compared with 6.9%.and tertiary education institutions fees climbed by 4.7% compared with 2019’s increase of 6.2%.”

This was largely exacerbated by a shift to online learning last year as there were additional costs for schools to bear, but it is not thought that as we normalise we are likely to see a reduction in the fee hikes. Time has shown us that the rising cost of education, pandemic or not, has been a consistent one over time from many years back and is not likely to change.

Current projections are that in the 8 years from 2022 to 2030 even at a public primary or high school, intuition fees could go from R50,000 p.a to R105,000 p.a. At private schools you are more likely to pay double that at a high school level.

…and that’s not all

What many parents fail to realise is that there are many additional costs to the intuition fees too. It is estimated that with books, cell phones, computers and computer fees, residences etc, some parents have a total education package of a much as R350,000 per year!

The silver lining behind the education fees cloud

Fortunately with some pre-thought, working with a good Financial Advisor, some disciplined savings and utilising compound interest there are a couple of financial solutions to the soaring cost of education! Pretty much from the time a child is born, if the parents, with an understanding of these cost projections embark on certain investments they can contend with these issues and provide a great education for their children.

Two ‘savings’ graces

Two excellent choices that adequately provide for these specific requirements are Inflation based Unit trusts and Tax-free savings accounts. One of the great concerns for many who take a debit order to save and commit themselves is that they like to know they still have some flexibility.

With Inflation based Unit trusts, not only are they designed to outstrip inflation in the long term but they are flexible and funds can be drawn at any time. That is not the intention though and this will probably only provide great returns if not tampered with too much.

For those with tax issues or just more cognisant of saving on tax, a Tax-free savings fund could be the way to go. There are restrictions on how much can be invested in these, but they are also flexible and your Financial Advisor can advise and guide you accordingly. Possibly a combination of these 2 investments would be the perfect solution for you?

We understand and advise accordingly

We at Hereford Group are a family of Financial Advisors and complimentary financial management experts and administrators, all with families of our own and empathy with every one of our clients that have these hurdles to face.

We have 25 years of providing customised solutions for each of our client’s unique requirements and would love to be of service to you. Stay safe, stay positive – and let’s work together to get all our kids through these trying times with flying colours!


Submit a Comment

Your email address will not be published.