MyMoney Online

Quality school (not university!) education will cost you between R1m and R7.7m

(Click here for more from Bruce Whitfield's The Money Show.)

Chris Pretorius, a wealth manager at AlphaWealth, recently became a dad. He decided to work out what he needed to save so that his son gets the best education possible.

He discovered that a top rate education in South Africa will cost between R1-million and R7.7-million, depending on whether your child gets a quality government education or South Africa’s equivalent of an Ivy League education.

The numbers are truly shocking given that these numbers exclude things like food, extra lessons, text books, clothes, sports equipment, medical expenses, holidays or a car when she turns 18.

The amounts only take into consideration the actual school fees and include nothing else, not even the acceptance fee that most private schools charge. It also excludes tertiary education.

Chris considered three different categories. Both private school options assume that your “little Scrunch” will go to pre-primary school (a junior college owned by Advtech) from the age of three and then to grade R at the respective schools. The government school option only assumes that your child started in grade R.

The first category is called Ivy League education which assumes your child goes to junior college and then Pridwin College before making his way to Michaelhouse or Hilton College.

The second category is termed first class education which included junior college before attending St. Johns, St. Stithians, St. Davids or Bishops.

Lastly, premium education includes King Edwards or Grey Bloemfontein but only at grade R.

“Planning for your little one’s schooling is not a cheap exercise,” says Pretorius. “This means that you cannot afford to invest cautiously. The numbers force you to take risk and the assumption that you will generate long term stock market returns. If you do not invest as aggressively as possible the amount of savings or lump sum investment will increase significantly.”

The table below shows what you can expect to pay for a new baby’s education. This is the value of all fees that you will pay in the future assuming 10 percent annual school price inflation.

Ivy League education First class education Premium education
Future value of all fees 7,738,802.77 4,114,116.57 1,072,104.17
Lump sum required 1,361,604 808,290 198,777
Annual contribution required 210,533 124,979 30,735

The table below shows the lump sum required at the birth of your baby or the annual required contribution. The amounts below do not make provision for tax and hence the amounts need to be escalated by at least capital gains tax.

Ivy League education First class education Premium education
Lump sum required 1,057,966 641,998 155,567
Annual contribution required 185,566 112,606 27,286

Listen to the audio for more detail as well as help to make the difficult task of saving for your child’s education a little less daunting.

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