For this reason, it is important to ensure that you really get the most out of your money and start saving as early as possible.
Parents always have the best intentions, with most of us vowing to put away a certain amount of money every month into a savings account meant for our kids. Global research by HSBC points out that 72% of parents of pre-primary school children think they will fund their children’s future university costs through savings. Despite this life can often get in the way, resulting in you having to dip into your savings in order to pay for emergencies such as visits to the doctor or car repairs. Then, your kids are 18 and ready to attend university, only there is now very little money available to pay for it. This is the main reason why young adults have to take out often expensive student loans and why most of them have the additional responsibility to pay off these loans over an extended period of time.
Alternative ways to secure your child’s education:
- Fixed deposit products
With fixed deposit accounts, the interest rate is definitely higher than what you would receive if you simply set some cash aside in a basic savings account.Click here to find out more about African Bank’s Fixed Deposit investment.
A fixed deposit is a term commitment product in which you would invest a lump sum, once off, to earn compound interest and leave it to grow over time. So if you already have a lump sum, a fixed deposit would be a good product to choose to earn maximum growth which is guaranteed since the interest rate is fixed for the duration of the investment and will not change with changing market conditions. Additional deposits cannot be made into a fixed deposit after the initial deposit. The rate offered is based on the term, the longer you invest, the higher the rate. The rate is not dependent on the balance but it is important to remember that the money cannot be touched until the selected time period has elapsed.
- Tax Free investments
Tax free investments offer the opportunity to earn maximum interest and growth over 12 months, guaranteed, is a tax-free investment account. The best rate (at time of publication) you can get is 8,67% if you shop around. So, to put this into context, let’s say your son wants to become a doctor or an engineer when he grows up. If you as parents simply put away R500 from the time he was born each month, this will grow your savings to R309 287.24 over the next 20 years and assure your son a bright future – tax free.
A tax-free investment account in South Africa allows you to get your full investment return, up to R33 000 per annum and R500 000 over your lifetime, without being taxed on any of the growth you have earned. You can either invest a lump sum into a tax-free account or add additional savings deposits at any time.
With African Bank’s Tax Free Investment, we guaranteed returns and it is hassle-free, fee-free and you will receive the highest growth on your investment. Instead of the traditional 7-, 32- and 90-day notice, the Tax-Free Investment account has a one-day notice period, but can only be accessed every year during the anniversary month of the account being opened. In addition, you can build your savings by making as many deposits as you like and there is no limit to the term of your Tax-Free Investment account. There is no minimum opening balance and you can even deposit as little as R50.00 to open an account.
Once you have decided on a preferred savings plan, it is worth shopping around before you invest your money. It is a good idea to choose a bank that you trust and that has a great reputation with regard to interest rates and guaranteed returns. Ultimately, saving for your child’s future is a straight-forward process as long as you do your research and keep your investment consistent.
Our top three tips for saving towards your future https://www.africanbank.co.za/en/home/blog-landing/