Plan early for your children’s education funding
Bank expert says there are ways to avoid taking student loans.
We have all heard it before.
‘There is no greater gift you can give your child than the gift of a secure education.’
Article regards of our sister publication, Zululand Observer.
But with most families living from month to month, putting away a little each month for education savings is getting harder given the tough economic environment, which is expected to continue this year.
Mellony Ramalho of African Bank says parents have the best intentions, with most vowing to put away a certain amount of money every month.
‘But life gets in the way, resulting in you having to dip into your savings to pay for emergencies such as visits to the doctor or car repairs,’ she says.
‘Suddenly your kids are 18 and ready to attend university, and there is very little money available to pay for it.
‘This is the main reason why young adults have to take expensive student loans and why most of them have the additional responsibility of paying off these loans over an extended period of time,’ Ramalho says.
‘The best way to save for your child’s future is to invest funds in fixed deposits.
‘These deposits can be quite flexible, allowing you to add money periodically.
‘The interest rate is higher than what you would receive if you simply set some cash aside in a basic savings account.
‘The more money in the account, the higher the interest rate will be and the more the funds will grow over time.’
These fixed deposits work by holding a certain amount for you for a specific amount of time (you can choose a time period between three and 60 months).
But it is important to note that the money cannot be touched until the selected time period has elapsed.
Save tax
‘A tax free investment account in South Africa allows you to get your full investment return, up to R30 000 per annum and R500 000 over your lifetime, without being taxed on any of the growth you have earned.
‘This product was introduced by national Treasury to encourage and allow every person the opportunity to grow their money without ever having to worry about being taxed,” Ramalho says.
‘Once you have decided on a preferred savings plan, it is worth shopping around before you invest your money.
‘It is a good idea to choose a bank that you trust and that has a great reputation with regard to interest rates and fixed deposits in general.
‘Ultimately, saving for your child’s future is a straight-forward process as long as you do your research and keep your investment consistent.’
