Funding for education has evolved dramatically over the past forty years, especially as the South African education system has been transformed from the heavily subsidised pre-1994 state system to the less-subsidised government education model that our children enjoy today. Having been educated during the 1970s and 1980s at the height of the apartheid era, there were very few private schools in existence, and only the very wealthy could afford to attend them. Our all-white government education structure was substantially subsidised, and although my husband and I received our secondary education in the Eastern Cape, the costs of attending a government school were similar all over South Africa. In fact, my husband has a vivid recollection of being in Sub-B (now referred to as Grade 2) when his father handed him a R2 note which would cover a term’s school fees. To put that into perspective, a Grade 2 education in a reputable government school in 1975 cost R8 per year, at a time when bread cost 17c a loaf. In other words, one year’s education cost the equivalent of 47 loaves of bread. 38 years later in post-apartheid South Africa, your child’s Grade 2 year at, for example’s sake, Pinehurst Primary School will cost R24 000, or 2 699 loaves of bread.
The reality is that our parents’ generation was never faced with real education costs until we entered the realm of tertiary education, at which point they experienced a massive price hike from paying nominal annual school fees to having to fund for the then-considered-exorbitant costs of tertiary education. Having attended a government school in the Eastern Cape and paying perfunctory annual school fees, my first year at Rhodes University set my parents back a whopping R11 000 (tuition and accommodation included). The massive differential between the cost of matric and the cost of first-year university was enormous, and warranted the assistance of student loans, bursaries and education policies. During those times, many parents (as did mine) took out now-outmoded education policies with established insurance companies to help fund for the cost of tertiary education during the first eighteen years of their child’s life.
In short, the South Africa’s education system – demographics, costs and syllabi included – has evolved dramatically over the past 40 years. In many ways it is unrecognisable from its apartheid-era predecessor, particularly when it comes to fees. At the top end of the price range, parents can now expect to pay between R3 500 and R4 000 per month for a top quality daycare centre with professional staff and small classes who accept children from age 3 months to 5 years. This equates to around R48 000 per year for daycare – more than the cost of a B.Comm degree at UCT. In the mid-range, affordable daycares charge around R2 015 per month or R24 180 per year – considerably more costly than a B.Comm or BA degree at NMMU or UNISA,
Enter primary school and education costs can range from R12 290 per year (Pinelands North), to R38 610 per year (Cannons Creek) to R64 620 per year (Bishops). To put these costs into perspective, a year’s school fees at Pinelands North Primary would be equivalent to the cost of one year at UNISA or a year at Intec College. As in the norm, school fees escalate slightly at high school level because of subject choice, specialist teachers and reduced economies of scale. High school fees at reputable government schools such as Rustenburg and SACS range between R28 000 and R30 000 per year, which is what you can expect to pay for a year’s tuition at Stellenbosch University. Private schools fees vary in price with Herschel, Bishops, Reddam and Parklands topping the tuition fee charts, with their fees ranging between R54 000 to R66 000 per year – substantially more than one year’s tuition at any given South African university. And whilst tuition at UCT is substantially more expensive than most of South Africa’s universities, its fees are dramatically lower than those charged by the top-end private schools in Cape Town.
The reality is that once your child enters the education system – whether it be daycare at the age of three months or Grade R at the age of five – the real costs of education will become a fixed line item in your monthly budget and these costs will not vary much until your child has completed their tertiary education. Pre-funding for your child’s tertiary education during the first eighteen years of their life is therefore an outdated practice. Having said this, there are certain once-off expenses that may need to be costed for when your child reaches tertiary education level, such as the purchase of a vehicle, travelling costs and accommodation (if he/she is studying far from home).
In order to fund effectively for these additional expenses during your child’s tertiary education, our advice is to avoid funding through insurance-based education policies. These policies are generally inflexible and there are normally fees and penalties attached to them in the event of early cancellation or termination. The two most practical methods of funding for additional education costs would be through a unit trust portfolio or through one’s access bond. A unit trust portfolio offers the investor complete flexibility with relatively low investment fees. In addition, there would be no cancellation fees or penalties involved. If you’re disciplined when it comes to saving, your access bond provides an excellent vehicle for additional savings.
More importantly, our advice is never to compromise your child’s education. Build the costs of your child’s education into your monthly budget and make it a priority. Develop the mindset that those monthly costs will remain permanent fixtures in your budget until your child has at least completed a three-year tertiary qualification. “Education is the most powerful weapon which you can use to change the world”, and we couldn’t agree with Nelson Mandela more.
Wishing you all a fabulous weekend!
Categories: Financial Planning