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Play the Long Game

ARTICLE BY

  • Sheila-Ann Robey
  • Financial Adviser
  • Liberty

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One of the biggest financial challenges parents face today is the rapidly increasing cost of education. This situation is an opportunity for advisers to apply their understanding of financial planning and future proofing to create solutions for their clients who often find themselves having to rebalance their spending in the face of rising educational fees.

From crèche to university, educational expenses seem to rise faster than the general rate of inflation, creating a strain on family budgets. Each year, many parents find themselves rebalancing their spending to accommodate these rising fees, which can be daunting, especially as they affect long-term financial planning.

Rising costs of education

In 2024, education-related expenses saw a significant jump. According to Statistics South Africa, the cost of education rose by 6.3% compared to the previous year. High schools experienced the steepest increase, with fees climbing by 7.3%. Primary schools and tertiary institutions followed closely, both raising fees by 5.9%. Additionally, university boarding costs surged by 8.2%, and crèches saw a 6% hike in fees. Early indicators suggest that 2025 will see similarly high rates of educational inflation. Given these sharp increases, it’s essential to consider education costs as a long-term financial commitment, much like a retirement fund or home loan.

Importance of long-term planning

The key to managing these rising costs is to plan well ahead, much like preparing for a long-term investment or major purchase. Think of a child’s education the same way you would approach a client’s retirement savings or home-loan. In doing this, it is important to establish a 20-year plan to manage education costs at every stage.

Here are some top tips to help clients navigate the financial challenges of their child’s educational journey:

  1. Start saving early: Just like buying a house, it’s crucial to begin saving before the real costs hit. A lump sum invested early can accumulate compound interest over time, helping to offset future education expenses. Education-focused savings policies, such as education builder plans, can offer a structured way to build this fund.
  2. Make regular contributions, even during breaks: While it may feel tempting for clients to take a break from saving during their child’s school holidays, consistent contributions – even when fees aren’t due – can help smooth out the financial load. This strategy will help ensure they’re always prepared for upcoming tuition payments.
  3. Consider education insurance: Just as you insure your home, car, and savings, it’s wise for them to consider insurance for their child’s education. Life events – such as unexpected illness or job loss – can disrupt a client’s ability to pay for schooling. Education insurance ensures that education remains uninterrupted, no matter what happens.
  4. Stay informed about costs: Educating clients about current and future education costs will enable them to plan effectively. By keeping track of expected fee increases, they can adjust their financial strategy accordingly and choose the best options for their family’s needs.
  5. Long-term financial advice: As with any long-term financial goal, the value of having ongoing advice cannot be underestimated. A professional will help their client navigate the complexities of managing education expenses over decades. Their expertise in long-term planning will ensure that they’re taking the most effective steps toward securing their child’s educational future.

Plan for the long term

The road ahead may not always be easy. For example, School Hive Directory estimates that the cost of 13 years of primary and high school education will almost double over the next two decades. In 2025, the cost of private high school education is projected to be around R180 100 per year. By 2038, that cost is expected to rise to approximately R333 400.

However, by taking proactive steps now, clients can manage these rising costs. Early planning is crucial; using strategies like compound interest and saving ahead can significantly reduce the financial strain in the long term.

Take action now

The most important step for a client is to take action: Speak with their financial adviser and to start planning today. A clear long-term financial strategy will not only reduce stress but also give them the confidence that they are on track to meet their child’s educational needs, no matter what challenges arise.

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