Education planning in South Africa
Education planning offers a structured way to save for your child's future. Read our guide on financial planning for education to learn more.
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A quality education has become one of the most important — and costly — investments parents make for their children.
Education planning offers a structured way to save and invest to meet these rising expenses. This can give parents peace of mind, knowing they are financially prepared for the future.
This guide covers everything you need to know about financial planning for education. We will explore costs and how to choose the right savings and investment strategies.
What is education planning?
Education planning is a proactive approach to covering your child's education costs. This could be to cover private school fees and university costs.
It involves setting aside funds in a strategic way to ensure these funds grow over time for when you need them. With increasing costs, it is essential to start early.
The South African Reserve Bank (SARB) projections estimate that inflation will hit 4.6% in 2024. However, private school fees are expected to rise between 6% and 10%.
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The cost of education
One of the first steps is knowing how much to save for your child's education. This isn't limited to tuition alone; it includes expenses like textbooks, uniforms, extracurricular activities and transportation.
While several factors can determine education costs, here is a breakdown of the average annual costs for education in South Africa:
Primary and secondary education
Fees vary between public and private schools, with the latter often costing much more.
According to research from the Old Mutual Group, the average cost of public primary and high school is just over R651,000. Meanwhile, a child's primary and secondary schooling at a private institution costs nearly R902,000 on average.
Tertiary education
University education can be expensive and varies depending on the institution and the field of study. The average university costs in South Africa in 2023 were R55,900. However, this is set to rise considerably with inflation.
Separate research from Old Mutual estimates that by 2035, the average cost for a standard degree will hit R253,000 per year. That figure does not include other expenses, such as textbooks and accommodation.
For parents wondering how much to save for their child's education, it's crucial to account for inflation to ensure the funds you save keep pace with future costs.
How to save for your child's education
There are several ways to approach education planning in South Africa. These include savings and investment options. Choosing the right one depends on your goals, risk tolerance and time horizon.
Some of the choices include:
Investment-based plans
Retirement annuities (RAs) can provide significant tax advantages. For example, they offer tax deductions on contributions and tax-free growth until retirement.
Options like funds and unit trusts allow for long-term capital growth. Investments carry more risks than savings accounts. However, they also offer a greater return potential.
Investments are a long-term strategy for building wealth, making them suitable for parents who start saving early.
Tax-free savings accounts (TFSAs)
Tax planning is another crucial part of education planning.
TFSAs allow you to grow savings tax-free. This makes them a popular choice for education planning in South Africa. Parents can contribute up to the annual limit, maximising tax-free growth.
Education savings accounts
These accounts are specifically designed for education savings and may offer some tax benefits. They're generally low-risk and provide steady returns.
The steps to building an education plan
Your education plan should reflect your goals and needs. Here are some steps to consider:
- Set a savings goal: your goal should be based on your child's age and the expected cost of their education.
- Understand risk: if you plan on investing, make sure your investment choices align with the amount of risk you are comfortable taking.
- Review your plan: revisit and adjust your plan over time to make sure it stays aligned with rising education costs and your child's needs.
Consulting a professional can help tailor an education plan to your family's needs.
Holborn South Africa is a leading, award-winning financial service and wealth management solutions provider. We offer a wide range of tailored services to help you reach your financial goals.
To plan your child's future today, contact Holborn Assets.
Frequently Asked Questions
Education planning is a proactive approach to cover future educational costs
With rising education costs, planning for the future is essential in South Africa. By planning early, parents can ensure funds are available for quality education. This will help give your children the best chance at academic success.
