Start saving for your child as soon as possible

Starting a family is a blessing, and the most challenging yet exciting time in a couple’s lives. Raising a child, however, can be quite pricey.

Renier Venter, Franchise Principal at NewCo Financial Planning in Krugersdorp explained how raising a child affects your budget.

NewCo is part of the Momentum franchise and has been around for ten and a half years. Renier has been in the business for the past ten years. They focus on insurance products as well as investments, and believe in getting their clients the best financial plan and helping them find a way to make that plan work.

Renier explained how the cost of raising a child could differ as a result of a number of factors.

“There is no set rule for what it costs to raise a child,” Renier said.

He added that the average amount for raising a child from birth to five years could come to R4 500 per month. What you spend on your child is not just the money that leaves your bank account, but factors like medical aid, extra petrol for driving kids around, and time.

One of the biggest expenses for middle to higher income families could also be education. It depends on the school you choose but some schools can be pretty pricey.

Where nursery schools could be more expensive than primary and high school, this does not necessarily mean that raising children gets cheaper when they get older.

Renier said it should be kept in mind that bigger clothes and shoes are more expensive as your child grows. There is the added expense of school clothes, spending money, extra-mural activities and trips to plan for. He suggests that parents not only compensate for a yearly increase in normal inflation, but for education cost inflation – he recommends parents plan for a 12,5 percent increase every year.

And once your children are all grown up, the next step could be studies.

“The average cost for your child’s first year of studies, for example towards a B degree at university, comes to about R180 000.”

This includes school fees, books, housing and transport, but it could be more, depending on your choices.

This amount goes down to 75 percent is the second year, because most of the initial expenses are in the first year. It then declines to 60 percent of the original amount in the third and fourth years.

“One third of students also get a part-time job in their second year, which could help with costs like spending money.”

The normal way to save for your child’s tertiary studies is with a study policy, or endowment. A financial planner could help you set up a 12- or 18-year savings plan for this, but Renier suggested you start saving as soon as possible.

Does it get cheaper the more children you have? Renier said that percentage-wise it could get cheaper if, for instance, you take into account hand-me-downs. On average raising your second child could be 50 percent cheaper than your first.

Bear in mind that these averages all apply to normal circumstances, and Renier has seen many parents adjusting their savings plans during the Covid-19 pandemic. Although it may seem that raising your children could be cheaper while they are at home, you still have to pay school fees and the extra expenses. Upgraded devices and internet infrastructure also accompany remote learning.

All this has had a negative impact on the way people are saving.

Renier said that every cent you save is better than the one you did not, and saving is always a step in the right direction.