Mothers working towards their children's education

Making sure that their children get a good education is the aim of many parents. However, the cost of education can sometimes put this out of reach for people. Karin Muller, the head of Growth Market Solutions at Sanlam noted that typically, education costs increase at a higher rate than general inflation, while a salary/income may increase at higher than inflation, but not necessarily to the same extent as that of education costs.

Historically the cost of education has increased by a rate of between two and four percent (a three percent rate is generally assumed when planning for education).

A recent survey conducted by Sanlam looking specifically at mothers with a combined household income of R10 000 or more, and with children between the ages of three and 15 revealed that the main aim of many mothers is for their children to have a good education.

The future cost of education
Sanlam noted that to study for a BComm degree at one of South Africa’s top universities currently costs between R30 000 and R62 500 per year. Parents with children starting grade one this year can expect to send their kids off to university in 2028 at a minimum of R84 400 per year, assuming an increase of nine percent per annum, highlighted Sanlam. This amount excludes the cost of residence fees (if required), meals, books and other associated costs.

Muller explained that if your child started grade one this year, and you start saving for their tertiary education now, you will need to save about R 1 070 per month, assuming a return of about nine percent. If you are planning to save for tuition and residence, that amount increases to R 1700. However, the earlier you start saving, for example from the time your child is born, the smaller the monthly contribution you will have to make.

While credit can be a negative thing, Muller stated that it can be useful in assisting parents to cover their child’s education costs.

“I think for parents who can’t afford to pay for their child’s education on their own, it does create the opportunity of sending your child to university. Credit is always problematic, but when you use it to create something in the long term that will provide you with a greater financial position, like buying a house, or affording your child a good education, then it is a contributor to the financial position,” said Muller.

However, she stressed that while a student loan can enable you to send your child to university and therefore assist them in finding a job, it is important to note that anything that you fund with credit will cost you more in the long term because of the interest.

“Most student loans require that you pay the interest while the child is studying and the rest must be repaid thereafter. Then there are the NASFSA loans also available to parents who can’t afford, but that again has got a means test requirement to it,” added Muller.

Furthermore, Muller pointed out that ideally parents should save for their child’s tertiary education, and then they can use a student loan to cover any shortfall.

What do mothers want for their kids?
“Our study shows that having the best possible education is the biggest dream that most mothers have for her children, regardless of their age or income. At the same time, one in four parents are not saving anything towards their children’s education - which means that these dreams may not be realised in future as the costs keep rising,” highlighted Muller.
Among other points revealed by the survey are:

• Mothers are working towards their children’s dreams for their children in a variety of ways, including saving and investing on their children’s behalf, sending them to the best school possible (mostly private) and even supporting the schools financially.
• Most mothers say they invest between R200 and R500 per month for a number of needs, including future schooling, extra-mural activities and/or their children’s nest egg for when they are older.
• Older mothers generally invest more in their children’s education than younger mothers.
• While the majority of mothers are optimistic about their children’s financial future, the middle-income group is less confident than the emerging and upper-income groups.

In addition, Muller noted that one of the interesting things to come out of the survey was that mothers want their children to be financially savvy.

“We see them talking about making sure their financial matters are taken care of, but then in terms of some of the other dreams, a lot of mothers mention teaching them about their finances, and I think this is really nice to see because it’s not something that’s going to cost you money, but it is something that will give a very nice return for your children ultimately, and how they think about money,” said Muller.

According to Muller, it is a great learning opportunity for parents to talk to their children about the costs associated with their schooling, not to make them feel guilty, but to make sure they have an understanding of what things cost. This is a helpful tool in teaching children how to manage money. However, it is important that this discussion is age appropriate.

Tips for parents
While university may seem a long way off for your child if s/he has just started grade one, Muller stressed that the 12 years leading up to university is not very long. This is particularly true when it comes to saving and being able to save enough for your child’s tertiary education. The sooner you starting saving towards university, the better, according to Muller.

Additionally, Muller offered the following advice to parents: “Plan for it properly, think long term, start as soon as possible, other than that, arm yourself with enough information, read up and see what you can find out, and anything that you save is better than nothing.”