Want to educate your kid overseas? Start saving (a lot!)

Charlene Prinsloo, Wealth Manager at AlphaWealth

“If you want to send your child to the UK in 2019 for tertiary education, you will need around R2.5 million. If you have a young child, you will need upwards of R9 million by the time they are ready to go and you will need to start saving about R17 000 a month immediately, escalating by 10% per annum on top of whatever you are saving to send your child to local private primary and high schools,” says Charlene Prinsloo, wealth manager at AlphaWealth. 

Increasingly wealth managers are being asked about the costs of offshore education after matric by their high net worth clients due to a perceived decline in educational standards in South Africa. Prinsloo explains, “We investigated the costs and they are staggering.” 

In South Africa, the average minimum cost of university tuition is around R35 000 per year. Here is the minimum annual tuition fees in US dollars converted into Rands for some top international universities.  

Source: www.topuniversities.com 

These costs exclude additional expenses such as study materials, textbooks and cost of living for the student which varies according to destination and the course studied. 

Prinsloo investigated how much a client would need to save to send their four year old to study at the University of Edinburgh, UK. She established that they would need to begin saving approximately R16 769 per month, escalating by 10% per annum to have sufficient capital to cover the four year tuition and average cost of living in 14 years’ time. 

 Savings recommendations 

Prinsloo made the following recommendations. “It will take huge commitment and full family buy-in with kids at private schools for even wealthy clients to educate their kids overseas. The sooner savings start, the better. Due to the large capital requirement, the longer you have to invest, the smaller the starting value.” 

1. Align your assets with your liabilities. As the liability in this case will be denominated in foreign currency it makes sense, to invest in foreign currency. This will protect the value of the investment should the Rand depreciate over the period.
2. Do your homework. Understand the budget required for your child to live comfortably and determine whether this is realistic. Many of the universities supply estimated tuition fees and cost of living for international students on their websites – this is a good base to work from.
3. Investigate scholarships. Most offshore universities and colleges offer scholarships which can ease some of the financial pressure for exceptional students if they qualify. These scholarships are difficult to get and the process of applying is somewhat tricky but there are organisations that can assist such as Crimson Education.