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NEXT YEAR’S SCHOOL FEES
Make a commitment now to start saving so that next January you can pay the bulk of your child’s fees upfront. You may also qualify for a discount on upfront payments.
An appropriate account would be a bank savings account or money market fund. Check with your bank what accounts they offer that allow monthly contributions at a decent interest rate. Set a schedule so the money is transferred automatically each month.
My preference is a savings account or “pocket” linked to my main bank account, so that I can transfer via my banking app.
Another option, if you have an access bond, is to pay extra into your mortgage each month. This has the advantage of reducing the outstanding balance, therefore you pay less interest. You can make a withdrawal of those pre-paid funds when the fees become due.
UNIVERSITY IN FEWER THAN FIVE YEARS
Your child may be in high school, and you want to start putting money away for their tertiary education. Given the relatively high interest rates now, a fixed deposit that allows you to contribute each month could be a good option. For example, Capitec has a multiple deposit fixed-term savings account that pays more than 7% for balances higher than R10 000. The longer the fixed-term, the higher the rate.
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One could also consider a low-risk, unit trust fund. The FNB Horizon Series funds are a range of low-cost unit trust funds that can be opened on the FNB banking app. It has a minimum monthly contribution of R300 a month.
The FNB Stable Fund of Funds aims to deliver 2% points above inflation. It is appropriate for investments of between three to five years.
TERTIARY IN MORE THAN FIVE YEARS
With education costs rising well above inflation, you need to make sure your investments do too. This means you need to take some level of risk by investing in equity-related investments.
A good option would be a balanced unit trust or exchange traded fund that has exposure to a variety of assets, including local and international shares, bonds and property.
The Satrix Balanced fund would be a good example of a low-cost fund that has low minimum contributions. In the FNB Horizon series, the Moderate Fund of Funds would be a good example.
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STUDENT LOANS
If you have not saved sufficiently for your child’s tertiary education, you could consider a student loan.
The bank will consider a repayment option where you are only required to pay the interest portion until the student finishes studying.
Banks typically give a six- to 12-month grace period once the student has completed their studies before full repayment is required.
The catch is that, as the parent, you must stand surety and the bank will consider your credit record and affordability. You need to make sure you are not overindebted and have settled other short-term debt.
