January is usually a tough month as our December pay cheques have to stretch longer and further. For parents of school-going children, the financial pressure is even greater as fees need to be paid, and uniforms and textbooks purchased.
When budgeting for this school year, don’t forget to include all the extras, especially extra-mural activities and extra tuition.
- Parents of children in high school are likely to be supplementing their education with extra lessons, usually in mathematics and a second language, so you need to include these in your budget.
- If your child is going on a school tour, you need to put money aside to cover those costs.
- Younger children may require after-care, so take that into account.
- Set a limit on how many “paid-for” extra-murals your children can do. Most schools offer a wide variety of free activities, and over-committing our children is not healthy for them or our budgets.
Once you have a clear idea of what 2018’s total education costs will be, put any bonuses or tax rebates away to meet those costs and, at the very least, pay the school fees now before those funds are eaten away by the December festivities.
Preparing for future fees
As you write up your school budget, it’s worth considering how you’re going to keep up with future education costs. Not only do these costs rise faster than our salaries do, but each phase of education is more expensive, with the fee increase between primary school and high school around 20%!
Liberty-certified financial planner Phillip Kassel says parents who want to prioritise education need to take an honest look at their monthly budget. Avoiding wasteful expenditure is one way to ensure you can meet those school expenses. Simply looking at your bank fees or reviewing your short-term insurance can free up extra cash that can be used to supplement your education savings plan.
The next step is finding a balance between saving for education and ensuring your children’s future is secure if you can no longer provide for them. Finding sufficient money to pay current school fees, save for future education costs and providing life cover can become unaffordable.
Kassel recommends a few options to ease the pressure:
- Liberty EduCator Benefit: Should you pass away, become occupationally disabled or severely ill, EduCator pays the costs associated with your child’s education until the child’s 24th birthday. As the policy pays the school fees directly to the institution, you don’t have to worry about what happens to the money you have earmarked for your child’s education.
Because the cover is only in place until the child turns 24, you’re not paying for cover you don’t need in the future. This reduces the premium, making it more affordable.
- Liberty Education Endowment: This covers all the aspects of preparing for your child’s education as it acts as both a savings fund and life cover as it has the benefit of premium protection on the life of the parent (or policy owner).
For example, if your daughter is six years old and you want to start putting money away for her tertiary education, you could select an endowment period of 12 years. Should something happen to you before then, your contributions will be paid by Liberty until the maturity period. This ensures that your child has the necessary funds available for further study once they finish secondary school.
The risk premium is substantially lower and simultaneously builds up capital that can be accessed for education expenses. The funds can be accessed during the term, although penalties may apply if you access them within the first five years.
“The best option is always going to be one that realistically meets the client’s budget constraints, even though it may not go the whole way in addressing the actual need. This is the reason why regular reviews are required in order to re-assess, specifically affordability, and whether that hole can be filled a bit based on increases in remuneration, bonuses, settling of other debt, etc,” says Kassel.
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