Pretoria, Gauteng -- (SBWIRE) -- 02/20/2013 -- Making sure your children are provided for and their education needs are met, has become ever more important. This makes this need for good financial planning even more important.
Saving for your children’s education
It’s never too early to start saving for your children’s education. In today’s rapidly changing world and fledgling economy, making sure that your children are equipped for the future is more important than ever. It’s never too early to start saving for their school and university years. But what financial plans should you be making?
Suzanne Stevens, Executive Director of Marketing at BrightRock, which offers individualised and flexible life insurance cover, provides insight on saving for your children’s education and teaching them financial responsibility.
1. When should you start saving for your children’s education?
It’s important to start making financial provision for your children’s education as soon as you can – we’d suggest from birth, if possible.
2. Please provide more detail on how one would calculate how much money to save each month?
How much money you’ll require depends on a number of factors – how many children you have, what kind of school you’re planning to send them to, what kind of tertiary education you have in mind for them and how long you’d like to provide for them for. Without taking into account pre-primary school or tertiary education costs, the primary and high school fees for a single child could cost you in the region of R400 000 for a public school and over R1 million for a private school over 12 years. That’s based on current pricing in the market and taking into account the impact of inflation.
Some parents expect to support their children only until they’ve graduated from high school at age 18; others are willing to support their children throughout their tertiary education until they expect them to reach financial independence, when they enter the working world – which, depending on the profession they choose, can be as late as age 24.
It’s important to not only take into consideration school and tuition fees but consider all the related expenses – food, accommodation, extramural activities and more. We suggest asking a financial adviser to help you do the sums.
3. How should this money be invested? How do you decide which investment or policy best suits your needs?
The vehicle parents choose for providing for education needs would depend on their budget and their broader financial plan. An independent financial adviser can provide sound advice, based on what other savings, investments and insurance policies are already in place.
For some parents, the simplest option is to set aside money in a bank account every month to save up for their children’s tertiary education. Others invest funds in an education savings plan or investment policy, where the funds are invested in unit trusts or other investment vehicles so they can earn higher returns and grow their education savings more quickly.
Parents should also make sure their life insurance cover makes adequate provision for the costs of their children’s care and education should either or both parents no longer be able to support their children financially because of an illness, injury or death.
How can you teach your children financial responsibility from an early age?
Set the example. Children learn their attitudes towards money from their parents. Before you can educate your children about money, it’s worthwhile getting educated yourself. There are many books, seminars and online resources available to help you draw up a household spending plan, manage your debt and build up savings.
Money talks. Don’t shy away from discussing money matters with children, and make sure you frame these discussions positively. If your children learn to fear money or feel negatively towards it, they won’t feel empowered to manage it well when they grow up one day.
Make it rewarding. Let your children earn their pocket money so they’re able to experience a sense of achievement and reward. Then open a savings account for their earnings – or just let them collect them in a piggy bank, so they can practice saving and spending.
Encourage entrepreneurship. Many schools offer entrepreneurship programmes or days where children as young as six years can run their own small business. The experience will teach them how to work out their expenses, and how to tally up their profits and their losses – valuable skills that can set the scene for future financial success.
BrightRock was started with the goal of creating insurance products that truly meets consumers’ and financial advisers’ needs. It offers truly individualised life insurance cover that’s built around your specific needs at the outset, and is specially designed to change with you as your needs change. And because BrightRock’s cover is flexible and changes appropriately when your needs change, it’s more efficient. This means both your cover and your premiums remain relevant, and more affordable, throughout your life. BrightRock(Pty) Ltd is an authorised financial services provider, underwritten by Lombard Life Ltd.