In September, we started a series about the three important lifestyle decisions that most of us are likely to face, all of which have financial implications. These are:  the house you choose to live in, the car you choose to drive and the school you send your children to. We end the series this month — coincidentally at exam time and amidst university protests — with a discussion about schools.

When you reach that point in your life when you begin evaluating schools, it can feel as stressful as making a decision to change jobs or relocate. For many of you, a lot weighs on this decision: possibly it feels like your child’s entire fate. From a financial planning perspective, we understand it’s hugely emotional, and we want to say, straight off the bat that there’s no right or wrong, as we want what is best for our children. But we also believe that whatever you decide will have implications on your finances and these are important to consider.

In South Africa, we have many choices when it comes to schooling. We have state-run schools, which are free or partly subsidised. We have Model C government schools, which are owned by the state but primarily funded by parents. In communities that have rallied around Model C schools for that additional support, the standard is often very high. And, we have private schools, whose fees can be well more than double that of a Model C. For many of us reading this newsletter, it’s a choice between private or Model C, and while we believe that cost should be a key factor, it is only one of a number of important considerations.

Just like people have different attitudes towards cars, the same can be said of education. But while attitudes differ, one thing generally remains universal:  everyone wants the best education they can afford for their children.  That said, there are many considerations, such as the distance and commute to and from school social environment –some want the private school feel, others value diversity — extra murals and sports offered and of course academics.

Besides these more tangible factors, there is the emotional backdrop to all of our lives, which is an amalgamation of our beliefs, experiences, and outside influences and pressures: whether or not you as parents, attended private school and were happy or unhappy with it, and where your friends and colleagues are sending their kids. Tradition is a wonderful thing and families going to the same school is something to cherish, but the cost of this education is rising faster than most professionals can keep up with. The big decision therefore, involves a weighing up of all of these factors: the not so quantifiable – tradition, reputation, sports and culture — and the quantifiable – school fees, along with unanticipated costs of extramural, school tours, etc.

The Rising Costs of Education

When it comes to the quantifiable, recent figures released by Stats SA indicate that South African households will have to make more room in their budgets to pay for rising tuition fees.

Stats SA updates education inflation figures every March, based on fees charged by schools and tertiary institutions. The most recent update, included in the latest Consumer Price Index release, shows that the cost of education rose by 9,3% in March 2015 compared with March 2014. This is 5,3% percentage points higher than the headline CPI of four percent. Education inflation has historically outstripped general inflation by around four percent.

As time moves on private education is simply going to be out of reach for many professional families. Why? School fees are rising by 10% and salaries by six percent. South African families are bound to feel the pinch. Old Mutual estimates that if a child starts Grade R this year, a complete education – including primary school, high school and three years of university – will cost just under R1 million for public school tuition, or R2,2 million for private school tuition (in nominal terms).

Yet many times, people are thinking only of doing what is best for their children, and not of what they can afford. In our view, it wouldn’t be so much of an issue if the costs weren’t so high, but the reality is that these costs must be taken seriously into account.

The reason we have chosen to tackle the three big lifestyle decisions as a series is that they are interlinked:  one choice affects the other and none should be considered in isolation. Where you send your kids to school may impact your choice of car or home, or vice versa. We encourage you (and your children who may be thinking about schooling for your grandchildren) to explore all options, talk to others whose values you are aligned with about schools and be realistic about the escalating expenses of schooling.

We understand that you want what is best for your child or grandchild, as we all do. The start of a child’s education is the time that you should be carefully assessing the long-term escalating costs, for you don’t want to expose yourself further down the line and become financially dependent on your children because of your decisions now.

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