Ever wondered if life would have been better if you had studied further?
I still remember my dad telling me to do well at school so that I didn’t end up working in a factory like him.
Now there’s nothing wrong with working in a factory – I’d love to be able to lay bricks and plaster – but who still wants to do that at 65?
I remember, plain as daylight, telling him I didn’t need the education because I was “going to make things happen”.
How I’ve lived to regret those words.
You see, my dad was talking from personal experience – something I didn’t have at the time (and some would say I still don’t).
Since then I’ve had the privilege of advising several high income people – from managers earning R140, 000 a month as I write this, to advocates who earned R350, 000 a month way back in 2003.
So when I look at my son I think two things:
- He needs to do well at maths so he can get those high paying jobs. I bet you feel the same way, too. In my mind this means the best teachers money can buy with the least possible number of students per class.
- He needs to excel at maths and science. Without these he can write off pilot, doctor, engineer, scientist…do you agree?
Let’s face it, government schools don’t seem to be the answer. So what’s the option? Private schooling.
Recently I read an article on the most expensive private schools in South Africa. Here is the gist of what was said…
The three most expensive schools in South Africa in 2015
- Hilton College in the Kwazulu Natal Midlands. This will set you back a whopping R209, 000 a year including boarding. That’s without uniforms, books, tours, and sports equipment. And when they tour, they’re not talking about visiting Gauteng.
- MichaelHouse – also in Kwazulu Natal Midlands – R192, 000 a year
- St Martins in Johannesburg will set you back R184, 460 a year.
Isn’t this crazy? And what’s the buzz with the Kwazulu-Natal Midlands anyway?
So how do you get your son into Hilton College?
You’re going to need to know the following:
- By how much do the school fees increase every year – Let’s assume school fees increase by 6% every year. I think that’s pretty low, but bear with me, okay?
- The number of years you’ll have to pay school fees – Grade eight (Old Standard 6) till grade twelve (Matric) equals 5 years of schooling.
- The number of years you’ve got until you need the money – Let’s say your son was born in January of 2015 and that you start saving from April. So that gives us 13 years before he starts high school. Help me out if I got this wrong.
Year Fees increasing at 6% every year
|2021 Grade One||296, 470|
|2022 Grade Two||314, 259|
|2023 Grade Three||333, 114|
|2024 Grade Four||353, 101|
|2025 Grade Five||374, 287|
|2026 Grade Six||396, 244|
|2027 Grade Seven||420, 549|
|2028 Grade Eight||445, 782|
|2029 Grade Nine||472, 529|
|2030 Grade Ten||500, 881|
|2031 Grade Eleven||530, 934|
|2032 Grade Twelve||562, 790|
This means you have to invest R2, 512, 916 just for high school education (I got that amount by adding all the red blocks together just so by the way).
On top of that, you will also need to come up with each of the amounts in red at the beginning of each school year (unless they offer a payment plan).
And how much will this cost every month?
The first thing I hope you do is invest in a medium to high equity fund. Playing safe by investing in cash ain’t going to cut the mustard.
Let’s assume you invested in the Allan Gray Balanced Fund.
According to their January 2015 fund fact sheets, the Balanced fund returned 15, 6% each year for the past 10 years. This percentage is important because the higher this percentage, the less you need to invest.
Investing in their Moneymarket fund – which is really cash – over that same 10 years would have earned you a measly 7, 5% every year.
Now remember that the same thing applies to your retirement planning.
If all you can afford to invest is a R1, 000 a month, and you have a massive retirement shortfall, then forget about playing it safe. You will need a higher risk high return investment. But watch out – if you’re two years away from retirement then this is the last thing you should be doing.
But back to the schooling scenario…
Using the Balanced fund you would need to invest R2, 297 a month from April this year right through till December of 2031.
Why December 2031? That’s because you need to pay the full school fees in January 2032.
If you played safe in cash then R3, 695 a month is more like what you need. And did I mention you need to increase these amounts by 10% every year to get there?
You need to decide whether you’re serious about this.
R200 a month into an education plan even at a reasonably priced private school is called wishful thinking. I doubt whether it’s even enough for a government school.
If R3, 000 a month is out of the question then prioritise what’s important – high school or university education?
Going for the university option gives you an extra 5 years to save.
And if that’s still too high, why not do it the same way you eat an elephant – one bite at a time? In this instance why not tackle one year at a time?
Decide to knock off year one at varsity starting today. Assuming year one at varsity costs R100, 000 right now. In 18 years’ time we’re talking about
R285, 434 if we use the same scenario and invest into the Allan Gray Balanced fund.
That’s a simple R245 a month invested right up until December 2033 – No annual increases in the amount you invest every year is needed.
If the thought of hauling out this much cash is making you uncomfortable then this should cheer you up.
He makes a valid point, don’t you think?
Need help with this?
If you’re willing to invest at least R500 a month, and would like some help, then contact me and I’ll help where I can.
What are your thoughts on the cost of schooling in South Africa? Leave a comment below as one of our guests.
At the very least take my poll below
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Until next time.
The InsuranceFundi Team