Can you afford to give your child an education?

A closer look at the costs

The above figures don’t take into account what you’ll spend on extras. Think about school uniforms, transport, textbooks, stationery and technological aids, food, extra classes, sport or other extramural activities, camps, pocket money, accommodation. The figures become significantly higher:

Saving for your child's Education

If you, as an income earner in the family, become disabled, die or suffer a severe illness, this could significantly hamper your ability to provide for your children’s education.

The market offers two ways to protect children’s education against a life-changing event to one or both of the income earners in a family – life insurance policies or education protection policies.

What if something happens to you before your child finishes studying?

If you, as an income earner in the family, become disabled, die or suffer a severe illness, this could significantly hamper your ability to provide for your children’s education.

Life insurance

With life insurance policies, you can set the initial amount of life, severe illness and disability cover as the present value of the cost of educating a child at that stage. But, with education inflation at 10% being higher than benefit growth options on the market, which are around 8% at best, it is it difficult to ensure that the amount of cover you select equals the cost of education over time.

In addition, for every year of education that passes without a claim, the present value of the cost of education goes down, in theory requiring a reduction in life cover. It could mean that in some years, you may have surplus cover and in others you may be severely underinsured. To fully protect your children’s education costs, you would therefore have to actively manage your life insurance policy by servicing up or down each year, in line with education inflation and the age of your children.

You could set the initial amount of life cover at the highest present value of education costs that could be experienced in the future to ensure that the costs of education will always be covered. This, on the other hand, could result in you being significantly overinsured in certain years.

Education protection

With an education protection policy, you can cover the actual costs of education if you or your spouse were to suffer a severe illness, disability or pass away. Education protection policies are usually only for a specified term, typically expiring when the child is 24 years old. Education protection policies grow in line with the costs of education each year to cover the actual costs of education, and therefore better meet the need to protect your children’s education.

Rising costs of education already make it difficult to save, and the reality is that you may be forced to choose between either saving or protecting for education, leaving you and your children’s education vulnerable.

Looking at new ways of protecting your children's Education

Discovery Life operates a shared-value insurance model in which all parties involved benefit from the positive behaviour of its members. By encouraging policyholders to manage their health and wellness through the Vitality programme, Discovery Life experiences lower claims and lower lapses. This saving is returned to policyholders, who then enjoy better value through discounted premiums, PayBacks and comprehensive benefits.

In addition, this contributes to building a society that is not only healthier, but also more educated and productive.

This information is this article is intended for general purposes only. Speak to your financial adviser about financial protection that suits your needs.