Free higher education still costs money

John Manyike, Head of Financial Education at Old Mutual.

In December 2017, South African President Jacob Zuma announced that all students from working–class homes would qualify for free tertiary education from 2018.

This means students from South African households with a combined annual income of less than R350 000 will be eligible for free higher education at any public learning institute. This includes universities, technical and vocational education and training (TVET) colleges all around the country.

“While this will give thousands of underprivileged South African students the opportunity to further their education, parents must understand that free education does not let them completely off the hook,” says John Manyike, Head of Financial Education at Old Mutual.

“There may still be various expenses not covered by the government student grant. These could include stationery, tools and equipment, as well as higher medical aid premiums for children aged 21 and older.

“If children are studying away from home, there are further costs of living expenses that may not be covered, such as, furniture, electricity and WiFi. These can be enormously draining on a tight budget.”

The economy can turn your plans upside down

For these reasons Manyike cautions parents not to become overly complacent and not to rely on free tertiary education alone, especially if their children are young. Policies may change over the years, and there is also the possibility that their household income will increase to a level where they will no longer qualify for financial assistance. In short, saving for your children’s education remains a good idea.

On the other side of the earning spectrum, parents from middle to high-income households also need to save for their children’s future education, even if they believe they will be able to afford to pay fees from their monthly budget.

“With global and local economic conditions as unpredictable as they are, it remains important to think ahead, and understand that circumstances and incomes can suddenly change – for better or worse. In a volatile world, the value of planning and saving for the future can never be underestimated,” says Manyike.

He adds that the competitiveness of the job market makes it more likely that your children will want to study for more than one qualification. “Parents must consider the financial implications of postgraduate study. A doctorate or specialised qualification can take between 6 and 10 years to complete. Internships are also often poorly paid, prolonging the period of parental support,” Manyike points out.

How to save without breaking your budget

While saving for all these education related expenses can feel like a daunting task, Manyike offers helpful tips to keep stress and anxiety at bay:

• Explore Investing in an education policy: This is one of the easiest ways to save for your children’s education. Ideally, consider speaking to an accredited financial adviser who can conduct a proper financial needs analysis and help you plan ahead and identify suitable solutions.
• Consider Opening multiple savings accounts, including stokvels, with specific purposes: This could help you create an emotional relationship with your goals to boost your level of discipline It’s easier to resist temptation and not dip into your education savings if it’s kept separate from your other savings.
• If you have a home loan you are paying off, deposit some of your savings in your Access Bond: By doing this, you will have quick access to emergency funds if any unexpected education-related costs arise.