As a parent, one of the best gifts you can give your child is a solid education but do you have any idea about how much it will cost to fund this education down the line and can you start setting aside money for it?
Here is a quick example using the OUTvest Education Calculator, which is a popular tool with forward-thinking parents who want to ensure that they have set something aside for when their children need it.
If you have a child today and you want them to start a 4-year University degree on the 1st of January 2041, you will need to have saved up R1 586 000 to fund this degree. The assumptions here would be that you would start with a lump sum of R10 000 and inflation was running at about 6%. It is also working on the assumption that you would not be setting aside any money for residence and your child would be living at home.
When you start seeing numbers like R1.5m, it can be incredibly daunting but a key message when it comes to saving is that compounding is one of the most powerful forces around and real wealth gets built when you stick to a plan.
Let’s break it down and assume that you start with R10 000. You will need to save roughly R1483 per month up-front. If we assume that you will be generating an average investment return each year and you will be increasing your monthly premium by 7% per annum in line with inflation, suddenly R1.5m doesn’t seem that far away.
The problem with theoretical calculations like this is that life invariably gets in the way and keeping up monthly contributions may not always be practical and this is where the OUTvest team have something quite novel to bring to young parents in the form of its Crowdvest functionality.
The Crowdvest offering allows people to contribute toward specific savings goals that other people have started. Taking advantage of the power of the crowd, you can then have friends and family contribute toward your savings goals and share the responsibility of helping your child get ready for university.
Giving your child the gift of a high quality education is one of the best ways you can set them up for success in the future and adopting a structured plan will take a big number like R1.5m and break it down into a bite-sized goal.
OUTvest is an authorised FSP. All investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets. The examples used are for illustrative purposes only and depend on various factors. T’s & C’s apply.