INVESTMENT VEHICLES TO SAVE FOR EDUCATION
• UNIT TRUSTS Many people choose unit trusts for longterm investments as there is a lot of choice as well as funds that focus on beating the rate of inflation by a certain percentage. This is important because education inflation is higher than normal inflation.
Unit trust investments are ideal for people who require flexibility and access to the funds. However, you must be disciplined and avoid the temptation of dipping into your child’s funds. • SAVINGS POLICIES These are fixed for a certain period, say five to 15 years, depending on when your child will go to school or university. You can either pay fixed monthly premiums or make a lumpsum payment into the policy.
You have limited access to the savings and generally have your savings invested in a wider range of the leading unittrust funds of your choice.
You can also choose to invest in some of the available life funds that offer minimum guarantees. These life funds are available only from life assurance companies.
Many policies offer a protection of premiums in the event of the death or disability of a parent. This means that if you die or become disabled and unable to work, the insurance company will pay the premiums for the remaining period. • FUNDISA This is a government initiative enabling you to save towards an accredited qualification at either a public college or university.
You’re paid an annual bonus on the investment, which can be up to 25% of the money you save annually, up to a maximum of R600 per child.
If you save R100 a month (R1 200 a year), you will get another R300 a year.
To receive the maximum bonus of R600, you have to save R2 400 a year. The bonus can be used only by the pupil or student. You can withdraw your own money but will lose the bonus. Start early, even if it’s a small amount each month. It will go a long way in the future after some investment growth.
Speak to your financial adviser, who will help you choose the appropriate product and give you advice on how much you should save. — Business Editor.