0107 OM Education Brochure - Old Mutual

Education.
Make the right
financial choices for
your child’s future.

How much schooling will cost you.
How much tertiary education will cost you.
How you can afford to give your children
the education they deserve.
(And why you need to save – even if higher
education isn’t what your child wants.)

Astronaut… or artist?
Lion-tamer… or lawyer?
Superhero… or scientist?
When they’re little, our children all want to
grow up to be something exciting: fairies or
spacemen, astronauts and racing drivers.
As they grow older though, we start to recognise the
possibilities for their lives even before they do themselves:
the toddler who once scribbled on walls starts to show real
artistic talent… a budding entrepreneur starts selling his
lunch for pocket money… your daughter invites her friends
round for dinner – and cooks it.
The truth is, whatever talents your children might have,
whether they use them successfully in the future or not,
could depend on the financial decisions you make today.
And those financial decisions aren’t complex or impossible…
they’re simple, commonsense choices. But considering that
the cost of educating a child privately starting in 2007 can
top R200 000, and that a six-year degree in medicine will
cost you around R400 000, it’s best you start thinking
about them sooner rather than later.
And you can do just that – with the help of this booklet.

First, take a
long hard look at
how much you’re
going to need!
No-one ever said raising children was cheap!
Especially considering that the key to your
child’s future success is a good education.
But how much will that cost, and how will you
afford it?
The first step is to look at the kind of expenses
you need to start planning for, and start making
decisions around those. Generally, we can
break your child’s educational career down
into three financial stages. If you make
some choices about those stages now, by the
time you finish reading this booklet, you should
have some idea of how much you’ll need.
And then, together with an Old Mutual financial
adviser or broker, you can look at how you
can get there successfully.
6

Stage 1:
Schooling
One of the first decisions you’re going to need to
make is whether you’d like your child to attend public
school or private school... and each of those have
associated expenses. Take a look at the basic costs
below to help you make your choice.
The basics:
Education from Grade 1 – 12
Total cost for child
starting in 2007
Total cost for child
starting in 2012
Public School
R106 788
R171 983
Private School
R219 768
R353 938
(These costs are based on an average starting cost in 2007 of R8 899 per
year for public school, and R18 314 per year for private school, increasing
annually at around 10% per year).
Money won’t create success,
the freedom to make it will.
NELSON MANDELA

Plus, some extramural activities or sports
have really expensive equipment, your child
might need extra lessons, there are field
trips, cellphones, computers and even the
odd pair of must-have Nikes to consider.
And come secondary school and the teenage
years, there are even more expenses to
look forward to: huge phone bills, Matric
dances, driving lessons…
On top of the basic costs on the previous page, you’ll need to layer some
extra funds to give you the freedom to make further choices for your
children when the time actually comes… Books and stationery, for
instance, are just two of the things you’ll really need to provide for your
child – and these alone can total as much as another R8000 per year.
Uniforms
Books and stationery
Transport costs
School trips
Extra lessons
Equipment / kit for sports and hobbies
Computer and software
Internet costs
Cellphone and airtime
Clothing allowance
Pocket money / entertainment costs
Driving lessons
A car
Estimated amount to set aside for
‘Extras’: R95 000 over a 12 year period.

Stage 2:
The Gap Year
Believe it or not, once your child gets through school, the
costs are just beginning! Today, very few matriculants go
straight to university – most opt instead for a ‘gap year’.
Whether your child’s gap year involves travel or just time
out, you can’t rely on him or her being self-supporting during
this period. For instance, your child may need a short course
to be more employable internationally, or gain experience in
a particular field by taking an unpaid internship, or simply
spend 12 months island hopping around the Med! Either way,
you’ll need to decide how much you’re prepared to pay for
– well before the time comes.
Potential expenses over 12 months:
Travel expenses (eg plane tickets, Eurorail pass, etc)
Accommodation costs / rent
Emergency fund
Extra courses (eg typing, secretarial etc)
Allowance (if your child is not self supporting)
Estimated amount to set aside for a gap year: R100 000
40% of Matriculants in South Africa are
unemployed. The difference between
success and failure for your child could
be the cost of a tertiary education.

Although you might not want to
believe it… the next steps are really
up to your child!
But you do need to have made financial provision.
For instance:
Is a University degree on the cards? And if so, are
you looking at a medical degree, which can take
upward of 6 years, or a simpler 3-year BA?
Is there a chance your child will want to study further
for an MA or PHD?
What about Technikons or distance learning, would
these save you money?
Is a part-time job a possibility while studying –
and will your child manage to be at least partially
self-supporting without it affecting his studies?
You may not have all the answers right now, but if you
want to give your child every chance of success, you
need to make sure you’re ready for the worst-case
scenario. And that means making financial provision
for the future as soon as you can.
And of course, if your child opts out of formal education
at any point, you can use the funds you’ve accumulated
as start-up capital for a good business idea, or as the
deposit on a flat: you’ll still be contributing towards his
future success.

Tertiary Education Costs:
Tertiary Qualification Duration 2007 2010 2013 2016 2019 2022
Commerce Degree 3 yrs R66 100 R87 979 R117 100 R155 860 R207 450 R276 116
Science Degree 3 yrs R69 278 R92 209 R122 730 R163 353 R217 424 R289 391
Law Degree 5 yrs R127 351 R169 504 R225 610 R300 287 R399 682 R531 976
Medical Degree 6 yrs R176 640 R235 107 R312 928 R416 507 R554 372 R737 869
Residence fees 3 yrs R85 500 R113 800 R151 468 R201 604 R268 335 R357 154
Residence fees / rent (see costs alongside)
Books & stationery
Equipment / kit for sports and hobbies
Computer & software
Petrol
Estimated amount to set aside for ‘Extras’:
R7 700 per annum.
* Degree costs and residence fees based on Wits University. An escalation of 10% per year is assumed.

Now, what are
your options?
Once you have an idea of how much you’ll
need to afford your child’s education, you’ll
probably start looking around for a solution.
Here are some that might come to mind:
Grandparents
Sometimes grandparents can be induced to contribute to a
grandchild’s education, but you can’t rely on this, especially
if doing so would impact on their retirement funds.
Bursaries / scholarships
All institutions offer these – but there are many factors
(including income and needs) that determine whether or
not your child will qualify, which means relying on a bursary
as a funding tool can be risky.
Student Loans
Banks are generally eager to issue a student loans – although
you may have to stand surety as parent or guardian.
On graduating and finding employment, your child would
need to start paying back their loan, which means starting
off life with a potentially crippling debt.
Investments
A structured financial plan can enable you to meet any
financial goal, including funding a child’s education – and
here’s where Old Mutual can help. Whether you prefer a
disciplined savings plan such as an endowment policy, or
unit trusts that offer more flexibility, putting money into an
investment regularly and allowing that money to grow over
time is the most reliable way to pay for your child’s education.
And an experienced Old Mutual adviser is the best person
to speak to. If you don’t have an adviser currently, simply
call 0860 15 15 05 for a recommendation in your area.

So, how much do
you need to start
putting away?
Take a look at the table below for an idea of how much
you’ll need to invest to cover the basics – in other words,
education and tuition for your child over the entire
course of a 3-year degree.
Your child’s 1st year No. Total fees Monthly
age now at of years for 3 years saving
university to go at university required
0 2025 18 R367 510 R 485
1 2024 17 R334 100 R 502
2 2023 16 R303 727 R 520
3 2022 15 R277 616 R 545
4 2021 14 R251 014 R 567
5 2020 13 R228 195 R 595
6 2019 12 R207 450 R 630
7 2018 11 R188 591 R 668
8 2017 10 R171 446 R 720
9 2016 9 R155 860 R 775
10 2015 8 R141 691 R 850
11 2014 7 R128 810 R 950
12 2013 6 R117 100 R1 080
13 2012 5 R106 454 R1 260
Note: These values assume your funds are invested in an investment from
Old Mutual starting in the year 2007, with the option of increasing premiums
by 10% p.a. The figures illustrated above assume an investment return of
4% p.a. and an escalation rate of 10% p.a. for university fees, based on a
3-year commerce degree. Total fees do not include residence fees.
Now speak to your Old Mutual Personal Financial Adviser
or broker – or call 0860 15 15 05 for a financial plan
that will enable you to meet your goals. Because the
sooner you start planning for your child’s future, the
brighter that future will be.
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Alternatively, use this worksheet to map out your
children’s education needs right here – it could be
a handy tool when you speak to an Old Mutual Adviser
or broker about how much you’ll need to save, and
when you’ll need to start.
Child 1 Child 2 Child 3 Child 4
Name Name Name Name
Born
Public or
private school
Year in which
to start school
Key talent /
sporting ability
Extra lessons
to nurture /
develop this
Any special
equipment needed
Gap year
Degree / Course
Year in which to
start Degree /
Course
Duration of above
Live in residence
or live at home
Post-graduate
studies required
And what if it’s not about education?
It’s a fact of life that Tertiary Education isn’t right for every
child. But whatever your children’s futures hold, you still
need to plan if you want to give them a head start. And
any investment you do make towards education, can always
be used to fund something entirely different…
Deposit Starting your
Car
on house own business
Today’s cost R 69 150 R 70 000 R 50 000
In 10 years’ time R179 357 R181 562 R129 687
In 20 years’ time R465 206 R470 925 R336 375
Note: Figures projected at an escalation rate of 10% per annum. Cost of a new car
based on popular hatchback. Deposit on house based on townhouse in popular area
in Cape Town. Starting your own business based on equipment, advertising, etc to
start a service business.

While you’re busy saving for your
child’s education, there are some
other expenses you’ll need to
consider too. So here are some
questions to get you started…
Children’s medical expenses can be significant – do you
have sufficient medical cover?
Do you (and your partner, if you have one) have Life
Cover with Disability and Dread Disease benefits, so that
if something should happen to you, your child would be
taken care of financially?
If you contribute significantly to your family’s household
income, do you have an income protection policy should
something happen to prevent you working?
Have you made a clear and comprehensive Will, setting
out terms of guardianship for your children and
appointing an executor?
Do you have an emergency cash fund to cope with any
extraordinary demands on your cash-flow?
Are you continuing to plan for your own retirement –
rather than putting that need on hold?
If you answered ‘no’ to any of these questions, an Old Mutual
Personal Financial Adviser or broker can help you with these
needs too, all you need to do is call 0860 15 15 05.

We hope you found this booklet helpful.
Please note that Old Mutual also has booklets
available on these topics:
Financial Empowerment for Women.
Divorce.
Options at Marriage.
Breast Cancer.
Investment.
Retirement Planning.
Life Cover.
If you would like one of these brochures sent
to you please, call 0860 15 15 05.
oldmutual.co.za
The information provided in this booklet is intended to provide you with objective information about
the topic under discussion and is not intended to constitute a recommendation, guidance or proposal
as regards the suitability of any financial product. It also does not constitute advice as defined in the
Financial Advisory and Intermediary Services Act, 37 of 2002. While every effort has been made to
ensure the accuracy of information contained in this booklet, Old Mutual Life Assurance Company
(South Africa) Limited and its directors, officers and employees provide no representation or warranty,
express or implied, regarding the accuracy, completeness or correctness of this information.
We suggest that you consult your Old Mutual Financial Adviser or your broker before taking any decisions
based on the information contained herein.