Education ination

The real cost of education

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Planning for someone great
Every parent dreams of what their children will become one day
a doctor, an engineer, a chef. The potential of each and every
child should never be underestimated, and neither should the
importance of planning for his or her future education.
The rising costs of education
We all know that education these days does not come cheap. Whether youre considering
the cost of primary school, high school, university or technikons, theres no denying
that the general cost of a quality education has risen substantially in recent years.
If your child was starting grade 1 at a private school this year*, its important
to know that you will have to spend over R1,5 million for their primary and high
school career. If youre looking at a public school for your child, youd need
to spend over R450 000. And if you want to send the same child to university
for three years, it could cost you about R350 000... dont forget that all these
gures exclude the cost of books, stationery, travelling, extra-mural
activities etc.
Tertiary education
fee increases
South African
ination rate
2006 8.8% 5.8%
2007 7.7% 9%
2008 8.1% 9.5%
2009 8.4% 6.3%
2010 7.9% 3.5%
2011 8.5% 6.1%
Average increase 8.2% 6.35%
As parents, education ination
is something we need to consider
when working out how much we
need to save to pay for future
school and university fees and
expenses. In the long term, we
can expect ination to be about
5% and so we need to calculate
the future cost of education based
on 9% per year fee increases.
Keep up with education ination
Because the cost of school fees will grow quicker than your average salary, its
important to invest in a combination of asset classes or funds with the potential to
outperform ination e.g. equity and property. Money market accounts, bank deposits,
and xed income unit trusts often dont reach returns of ination plus 2%. Which
means this type of investment would not be enough to do better than the rising cost
of education.
SmartMAX allows you to split your capital across a number of funds
managed by leading fund managers, without the hassle of individual
fund minimums. This diversied spreading of funds and an annual
premium increase in line with education ination,
will help you to get returns in excess of education
ination. With a SmartMAX Education Plan, you can be
sure that youre doing everything in your power to give
your child the head start in life that he or she deserves.
Why has planning for your childs education
become a necessity?
One of the main reasons we struggle to save enough to cover the cost of school
and tertiary fees (and all those extras) is because of education ination. Essentially,
education ination is higher than South Africas ofcial ination rate (CPI).
This gap has widened from around 2% in the early 2000s to as high as 4% recently.
Remember, you cant count on fund performance alone. It is vitally important
to increase your premiums every year, in line with education ination.
This keeps you ahead of the rising costs.
*2012