How can I secure my child's education?

We recently welcomed our first-born and as a young family, we want to take the rights steps to save for our child’s education as soon as possible. What can we do to develop a comprehensive education savings plan that will take into account our child’s age, future tuition costs and our current financial situation?

Name withheld

Robyn Laubscher, Advice and Product Specialist, PSG Wealth responds: Congratulations, what an exciting time! There are a few aspects to consider:

Savings:

From a savings perspective, one thing to bear in mind is that the sooner you start saving, the better! I would consider starting with tax-free savings account. A tax-free savings account has many benefits:

● You would be able to open the contract in your minor child's name.

● There is no tax within the structure.

● There are a range of underlying investment options available, although certain restrictions do apply. For example, investments charging performance fees are not allowed.

● There are no limits on the growth within the portfolio, so the sooner you start, the better. There are however limits to the contribution amount, currently, the limit is R36 000 per tax year and R500 000 per lifetime (a penalty tax of 40% is charged on contributions above the prescribed limits). Bear in mind that if you open the contract in your child's name, all contributions will count towards their own annual and lifetime limits.

Other considerations:

● Your will must be updated to include your nominated guardian for your child, should both parents pass away. It is important to discuss your wishes with your nominated guardian.

● Provision should be made in your will for the benefit of your child. It is important to create a structure that will provide for your child's needs, should you pass away. A testamentary trust is often a good option to consider.

● There are also education benefits that you can add to your life cover that would pay for your child's education should you pass away. I would also suggest you engage with a financial adviser to discuss all the options available to ensure your goals are achieved.