Why it’s important to start saving for school

Why it’s important to start saving for school:

The cost of schooling is another nagging concern for many parents as they wait to hear if their children will be placed in Grade 1 or Grade 8 in 2022.

Many parents are unaware that the cost of schooling their children has a direct impact on the quality of their retirement, long after their children have graduated from high school and are earning their own money.

According to Sbusiso Kumalo, Chief Marketing Officer of African Bank, there are only two realities when it comes to the expense of school and retirement.

“The first is that if you don’t save for school uniforms, school fees, and all the other dozens of extras, you’ll have to pay for them out of your monthly cash flow, limiting how much you can save for your own retirement.”

“However, if you have a savings fund to meet these fees,” he explains, “you have the opportunity to spend any additional money you have toward your own retirement goals.”

There are three more compelling reasons to save money for your child’s education:

• Having a Matric certificate is no longer a guarantee of employment. Your child will require some type of university education, which is not cheap, in order to compete in today’s competitive employment market.
• Thousands of university students fail to complete their courses due to financial constraints.
• A well-educated child has a better chance of finding work and becoming financially self-sufficient sooner in life. They might even be able to assist you financially in your later years.

When should you start saving for your child’s education?

According to Kumalo, the answer is as soon as possible.

“Twelve years of school may seem like a long time, but it flies past. So, if your child will be in Grade One or even Grade Eight next year, open a savings account and begin contributing every month right away.

“Rather than having to pay for uniforms and school fees out of your monthly paycheck, you could start saving today and cover the majority of the expense of schooling. You can relax knowing that you have money to invest into your personal retirement fund now that this is taken care of.”

Kumalo emphasises that people who begin saving later in life will have a much lower potential to invest in their own retirement.

This is because any spare money would have to go toward schooling.

“Without sufficient preparation and provision for the costs of putting a child through school,” he explains, “parents’ good intentions of saving for their own retirement can swiftly spin out of control, and their ambitions can be quickly abandoned owing to a lack of money.”

Parents who are serious about increasing their money should opt for a flexible savings account, according to him.

This type of account ensures that your funds are not locked up for long periods of time and that you can access your savings while collecting interest.

“You can have the best savings plan and intentions with your bank account,” Kumalo explains, “but be disappointed later when your efforts do not bring positive results. This is why compound interest is one of the most significant variables in saving money, so make sure the savings account you choose has the best interest rate.”

While Covid-19 has had a significant impact on consumer finances around the world, Kumalo underlines that tough times should not dissuade people from saving.

“The beauty of a savings account is that it only requires a little deposit each month, rather than thousands.  Consider this: if you put R200 into your savings account every month, you’ll have R2 400 at the end of the year, plus interest.

“Imagine how liberating it would be to take your funds and use it to enroll your child in school, purchase their uniform, or pay off debt and you’ll have money to put toward your own retirement goals!” Khumalo concluded.