Many South African parents are falling under the burden of the rising cost of living and providing for their children’s education and basic needs. The cost of education, stationery, and other necessities like school uniforms can be particularly high, making it difficult for many families to cover these costs, leading to financial stress and strain on parents, as well as difficulties for children in terms of accessing the resources they need to succeed in school.
There is no doubt that the cost of living crisis is having a massive impact on people across all income levels around the world. According to the UN Development Programme, soaring food and energy prices have seen 71 million people in developing countries fall into poverty. In South Africa, economists believe the country is at a high risk of entering a recession this year amidst the ongoing scourge of load shedding, rising interest rates, and unemployment.
One of the most effective ways of breaking the cycle of poverty that is leaving millions of children, youth, and adults behind is that of education.
Cost of education
According to Old Mutual, education inflation is outpacing the Consumer Price Index by up to 3%. Further statistics show that if a child starts Grade 1 this year, parents can expect to pay between R651 000 and R1.9 million for public or private education respectively over their school career. Realistically, this means that most parents, regardless of income levels, will be unable to save the full cost of their child’s school and tertiary education fees.
Of course, the escalating cost of education also impacts the economic growth of a country. Limited access to quality education may lead to a reduced talent pool, stifling innovation. Additionally, growing inequality in educational opportunities can exacerbate social divisions and contribute to political instability, affecting market prospects.
When factoring in the most recent inflation figures that have seen consumer prices in December rise by 0.4%, following a 0.3% rise the previous month, it has become vital for parents to look at alternative ways of saving for their children’s education.
Traditional limitations
Some people may think that their life insurance or funeral policies will provide enough money for their children to continue attending the same schools in the event of their untimely death. Unfortunately, the amount of money provided by these policies may not be sufficient to cover the full cost of education, particularly for private schools or expensive state-run institutions.
Additionally, it is not a common practice for life insurance policies to be specifically designated for educational expenses. In most cases, the beneficiaries of the policy can use the funds as they see fit, which may not necessarily be for the children’s education. Of course, there are also funeral costs, outstanding debts, and other expenses to consider beyond school and other educational fees.
Caregivers must also keep in mind that lump sum insurance payments received on the death of the parents should be invested. This creates additional uncertainty especially when it comes to the return on investment. And then there is the administrative burden with funds having to be withdrawn at regular intervals to pay for school fees and other educational expenses.
Specialised cover
It is against this backdrop that a dedicated education insurance policy becomes crucial - one that is designed to cover the cost of a child’s education in the event of the death or disability of a parent or guardian. The best education insurance policies allow for the fees to be paid directly to the school or education institution via a trust that is ring-fenced to only cater for the educational needs of the child.
Factors such as tuition, uniforms, books, and other educational expenses must all be considered. They must also make sure that the policy covers the local and international schools the child will likely consider. Another caveat is whether the policy will cover private or public schools, or both.
Built-for-purpose education insurance policies provide parents with the peace of mind they need to invest in and provide a launchpad for them to grow. It is also important from a broader societal perspective. Education is key to personal and societal development, economic growth, reducing inequality, human rights, and preparing for the future. It is an investment that has a long-term impact and benefits for individuals, society, and the economy as a whole.
Investing in education equips the new generation with the skills and knowledge needed to adapt to rapidly changing economic, social, and technological environments. Education insurance is therefore a fundamental building block for parents to enable their children to continue their education journey when they are no longer around.
Braudo is the CEO of Futurewise, an affordable education insurance provider