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Saving for your child’s education and investing into their future

| Investment Landscape

If you are a parent, opening up your first term’s school fee statement was probably a keen reminder of just how expensive schooling can be. Providing your children with a good education is a non-negotiable these days as this sets them up for a good career in the future.

So how do you achieve your dream of financially providing for the best education possible for your loved ones? First things first, you need to start saving as early as possible in your child’s life.

A Model C school education could cost anywhere between R8 000 and R25 000 a year bearing in mind these figures change yearly. Then, once your child has completed matric, you could see yourself pay more than R50 000 a year for further study at a technikon or university. These may seem impossible to prepare for in advance, but starting to save when your child is born will put you in a very good position to pay these costs when they arise.

Dealing with the rising cost of living expenses such as food, petrol and electricity to name just a few, saving for your children’s education is probably far from an immediate need when they are still in nappies. If you think you can’t find R300 a month, often it is just a matter of becoming aware of your spending patterns and giving up on some non-essential items so that you can find saving pockets.

Sanlam Investments’ recent Power of Patience campaign highlighted the financial benefit of delayed gratification, encouraging people to make conscious, informed purchasing or investment decisions rather than impulsively spending their hard-earned cash on non-essentials. It is human nature for us to want instant gratification. But the truth is that whenever we spend money we could have put to good use by saving, we are in fact losing out on a big opportunity – the opportunity to invest that money and make it work for us by harnessing the power of compounding.

Where do you begin?

‘Compound interest is the eighth wonder of the world. Those who understand it, earn it… those who don’t, pay it.’ Albert Einstein

Compound interest allows money to earn an investment return on the return you have already received. When you invest, you get a return on the capital you already invested. So if you invest R100 and it increases to R110 by the following year, you will achieve a return on the R110 not just the original R100. Over time this compounds and results in significant financial gain for the investor.

The growth may seem slow at first, but as time passes and the investment returns build up, you will experience exponential growth in the value of your initial investment, putting you in a strong position to be able to comfortably afford all those educational costs further down the line.

It’s not just parents who can benefit from the power of compound interest.  By investing just R200 a month in a unit trust or making a lump sum investment starting at R5 000 or both, you can invest for any financial goal that is important to you. The bigger your investment, the bigger the potential return and the faster you get to realise your dreams and build future wealth. Click here to view our unit trust tool.

We’ve all heard the saying ‘good things come to those who wait’ so tap into that discipline you know is there and patiently watch your money compound over time because the satisfaction you are likely to get from seeing the financial results down the line are sure to outweigh the short-term gratification you could have received from that new mountain bike, stiletto heels, plasma TV or car.

 

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