Now that the dust has settled, a lot of parents whose children were not fortunate enough to secure scholarships or bursaries must be lamenting about why they didn’t begin saving sooner.
Unfortunately for them there is no silver lining in the clouds for and the light at the end of the tunnel is that of an oncoming train as the bills have just begun piling up. Books, transport, accommodation, food, clothing, these are but a few things that their children will need, the list is endless and will continue to grow in the next four years or at least until their child graduates.
“As a parent, you have an enormous emotional investment in your child and a big part of it is the desire to equip him or her to be a successful participant in and contributor to the world. Inevitably, that means being able to provide the best educational opportunities. The problem is that, if one considers university, just one year could cost about N$200 000 and that includes the cost of residence or transport to and from classes if you are fortunate enough, otherwise that is just for the courses,” Standard Bank’s PR and Communication’s Manager, Surihe Gaomas-Guchu said this week.
She explained that for the ordinary man that amount is granted to break their bank within the first year, never mind if they multiply it by the number of years that their child will have to study.
“One can get overwhelmed simply just by thinking about how much it costs, however if you objectively think about it, one of the smallest hatch-back sedan cars, brand new, is going to set you back at least N$200 000. If you include the interest on a five-year finance plan, it’s going to cost you as much as N$250 000. Your monthly payments will be about N$4 000 a month, for five years.
You’ll probably replace that car every five or seven years, when prices will have gone up – as will your monthly repayments. So, just replacing a car three times during your child’s first 18 years is going to cost you N$750 000, that is more than a three-year degree,” Gaomas-Guchu explained.
Using that logic, saving for your child’s education will cost you way less than replacing your car 3 times in the 18 years before your child goes to university. Additionally, a car begins to depreciate in value the moment you drive it off the lot, however your savings will grow every year and you end up having more money than you anticipated.
“If you save N$1500 per month for your child’s education on 5% interest rate, you will find yourself with about N$290,791 at the end of 10 years. Obviously, the rate of interest increases as the amount in the savings account grows. So, the earlier you start saving, the more capital you’ll accumulate. And, because interest compounds, you’ll start earning interest on the capital. You’ll be surprised at how rapidly your savings grows,” she pointed out.
If you are serious about saving for your children’s education, then you should make use of special investment vehicles such as education or endowment policies than simply putting the money into an ordinary savings account.
These investment vehicles will ensure that your monthly payments keep up with inflation and increases in the costs of education; give you higher interest on your savings because you’re investing over a longer period of time and make it difficult for you to dip into the funds when you have a sudden shortage of cash for day to day living.
“An integral part of being good parents is to provide our children with a sound educational foundation, one that will help them reach their full potential and fulfil their dreams. This doesn’t come cheap, or happen by chance. So start saving today and ensure your children have the bright future you envisaged for them the minute you first laid eyes on them,” she concluded.