Investing for future education

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Friedpet

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Hey

So I've been doing some research on options for saving/investing for tertiary education for our girl (7 months old currently). I've decided on going with an endowment - mostly because of the tax benefits for me. And, as always, I wish I had started sooner.

I started thinking, that, hopefully, in 18 years' time, I'll be in a much better financial situation than I am in now. House paid off, cars paid off, etc. (wealth accumulation) :confused: (one can dream, right?)

In any case, I'm thinking that I don't have to try and save enough to fund 100% of the future university expenses - although the closer I can get to 100% the happier and more relaxed I'll be about it. (how much is 100% even going to be??)

Now I'm wondering how other people are saving for future education for their children.
Other young parents, are you aiming for 100%? Or as much as possible? Have you even started?

Parents with children at university right now, how did you save? Did you save enough or are you covering a lot of the costs with your monthly income or even a loan?
 
hawker

hawker

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Whatever it is, its going to be expensive. The sooner you start the better. Aim for 100%!

Could be hundreds of thousands or even millions.
 
supersunbird

supersunbird

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I started saving ,for a then 9yo, tertiary education in 2013. Still 5 years to go at least. If tertiary education is free (whether govment policy or bursary or such), then that's fine, and the money will be used for other needs she might have.

Half half Satrix Equally Weighted Top 40 and Satrix MSCI World index unit trusts
 
F

F1 Fan

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How much can you afford? My suggestion would be to invest in a small property...
 
F

Friedpet

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hawker said:
Whatever it is, its going to be expensive. The sooner you start the better. Aim for 100%!

Could be hundreds of thousands or even millions.
Click to expand...

In 18 years, I'm betting on millions...

supersunbird said:
I started saving ,for a then 9yo, tertiary education in 2013. Still 5 years to go at least. If tertiary education is free (whether govment policy or bursary or such), then that's fine, and the money will be used for other needs she might have.

Half half Satrix Equally Weighted Top 40 and Satrix MSCI World index unit trusts
Click to expand...

That's a big 'if'. Are you saving towards a target or are you saving as much as possible?

F1 Fan said:
How much can you afford? My suggestion would be to invest in a small property...
Click to expand...

Tough question to answer. Wife's just starting to work now after an unpaid maternity leave, we've been living of savings to cover about 20% of our expenses. Hopefully in a few months we can put away a few k's per month.

We've been diversifying our portfolio. TFSA for all 3 are maxed, rental property, and other stuff. The idea would be not to use any other "investment" besides the dedicated education investment for the studies, but obviously, if needed then, we could.
Besides selling a rental property later on, do you reckon the monthly income could fund a child's university fees? I've honestly never considered using a rental property this way.
 
hawker

hawker

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Friedpet said:
We've been diversifying our portfolio. TFSA for all 3 are maxed, rental property, and other stuff. The idea would be not to use any other "investment" besides the dedicated education investment for the studies, but obviously, if needed then, we could.
Besides selling a rental property later on, do you reckon the monthly income could fund a child's university fees? I've honestly never considered using a rental property this way.
Click to expand...

Depends on the property. I.e. my fees at Uni of PTA were around R30k a year, then you'd have do another few Rxk a month for rent/food etc. etc.

Rental income could cover it (break even) if you're lucky.
 
supersunbird

supersunbird

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Friedpet said:
That's a big 'if'. Are you saving towards a target or are you saving as much as possible?
Click to expand...

As much as my budget allows for as long as possible. What then nice about it is you cash in bits as needed while the rest keeps doing it's growing thing. And obviously the budgeted amount that went to the debit order can now go straight towards the education as well at that time.
 
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F1 Fan

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Friedpet said:
Tough question to answer. Wife's just starting to work now after an unpaid maternity leave, we've been living of savings to cover about 20% of our expenses. Hopefully in a few months we can put away a few k's per month.

We've been diversifying our portfolio. TFSA for all 3 are maxed, rental property, and other stuff. The idea would be not to use any other "investment" besides the dedicated education investment for the studies, but obviously, if needed then, we could.
Besides selling a rental property later on, do you reckon the monthly income could fund a child's university fees? I've honestly never considered using a rental property this way.
Click to expand...

Well you mentioned your requirement is to fund Tertiary education only. So lets make some assumptions:

Purchase Property: R1m
Bond: R10 000 per month
Potential Rental income: R6 000
Your contribution until rent = bond: R 4000 per month for lets say 4 years worst case.

The property will pay itself off for the rest of the bond period, leaving you with a mostly bond free property in 18 years.

I would estimate that property would be worth about atleast R5m, which should bring you a rental income of atleast R30 000 per month 18 years from now. Alternatively sell the house and pay for education cash.

If anyone else has input, please share?
 
ISP cash cow

ISP cash cow

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I originally opened up an actual " tertiary education policy" when my son was born. After a couple of years in the policy I just found that the money was not getting very good returns and it just sitting in a fixed savings account would have probably brought the same amount of earnings and so I transferred the money into a unit trust portfolio of which then I just paid my monthly contributions into it.

My son started varsity 3 years ago and the policy has covered the cost of his first three years at varsity. Lucky for us though he was accepted into Wits and we do not live that far away and so he didn't need boarding or other extra costs over and above.
 
S

Sepeng

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So my question to you would be - forget varsity, how much is the kid's schooling going to cost monthly?
From what I can see, varsity costs are at worst on par with school fees these days so if you can send your kid to school you could just use the same cash to send them to varsity after.
 
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Trompie67

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Emigrate.

The only way to "afford" any semblance of a quality education for your children is the GTFO of ZA.

Both our children are at private schools.

Grade 8 2018: R43k a term
Grade 11 2018: R58k a term

That excludes text books, laptops, camps etc.

Work on 120k a term with uniforms, books, sports, camps, hot lunch etc.

So R360k a year for the 2 of them.

Varsity is less expensive.......

Except - IMHO varsity in ZA is becoming worthless. Do the research, what were once respected qualifications are now worth sh i t on the international market.

Both our children will be attending Uni overseas. Thus far our son at MIT and our daughter... will wait & see.

So now you have to figure out how to fund Uni overseas using ZumaRands.

Make sure you know how to touch your toes & invest in bulk purchases of KY.
 
supersunbird

supersunbird

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Trompie67 said:
So now you have to figure out how to fund Uni overseas using ZumaRands.
Click to expand...

You save for a long time in feeder fund unit trusts or ETFs (if you cant invest it directly overseas), that will take care of R devaluation. So there's that figured out.
 
F

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^^^I think the above is skewed depending on where you live.

Where I am, there are good schools that cost 30-40k per year.

Private school in any country is crazy. In fact, SA is relatively cheap in comparison.

Regarding universities, it all depends on what you study. You can't go wrong with Engineering, Accounting (CA), Actuary and Medicine.
 
SauRoNZA

SauRoNZA

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100% the main goal should be to just save instead of not saving.

Preferably in a fixed capacity that is hidden from you so it doesn't tingle your senses to borrow from it.

I would stay away from anything involving a contract and try to keep the costs as low as possible.

Personally I'm opened up an Easy Equities account for my daughter originally with the intention to put everything into a TFSA but then opted to put it in the regular account until such time as the profits are enough to become taxable and then I'd move over to the TFSA side.

Just been buying the Aconcagua Growth Basket to avoid managing it actively. You could even go so far as to set it up to do this monthly automatically.

If 10X or the like would let me create an account in her name for this purpose I probably would do that instead to have even less of an eye over it.

****

I should mention part of the logic with going Easy Equities is that it's easy for family to pay money into her account when they feel like it or on the regular which isn't always the case on other options.
 
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Trompie67

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supersunbird said:
You save for a long time in feeder fund unit trusts or ETFs (if you cant invest it directly overseas), that will take care of R devaluation. So there's that figured out.
Click to expand...

Umm nope. You're already investing using devalued ZAR. Define a long time? you've got 18 years from the time each child is born.

Have a look at Uni fees overseas: MIT is $48,500 for the year (their years are not calendar years, 2 terms, Fall & Spring).

That is currently R620k annually. Excluding books, accom, food etc.
 
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