Child education investments options
Education has become critically important in South Africa. The cost of education in South Africa varies, especially between public and private schools. The truth is the best time to start saving for your child's school fees and university costs is right now!
The various savings options available to parents include the following:
Unit trusts, either bought directly from the asset manager or through a linked investment service provider, offer a simple and generally cost-efficient way to get exposure to equities.
Tax-free savings accounts
A tax-free savings account can be opened in the name of a child, who will have their own R36 000 annual limit. The lifetime contribution limit is R500 000.
Education saving plans
Education plans on offer by most financial services companies and insurers are typically endowment policies. With endowment policies, a monthly contribution is made for a specified period and a lump–sum amount is paid out at the end of the period. The minimum investment term is generally five years. For higher-income earners, endowments potentially offer greater tax efficiency because they are taxed at a flat rate of 30%.
Life cover and education protection is important because investments made for your children to be continued. In the event of death disability and severe illness.
Fundisa, an education savings initiative by the government, the National Student Financial Aid Scheme and the Association for Savings and Investment South Africa, has the advantage of a top-up bonus annually as a reward. This can be as much as 25% of the amount saved per year, up to a maximum of R600 per child. The minimum contribution is R40 per month, and there is no maximum. However, only the first R2 400 saved per year will qualify for that top-up bonus. Fundisa is designed for lower-income earners, and only learners whose families earn below R180 000 per year will qualify. This only applies to the learner (and their family), which makes it a compelling way to contribute to education savings for a child of a nanny or similar employee.
Contact one of our advisors for more information.
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