School fees: To Save or Not to Save?

Mar 8, 2013 | Features, Uncategorized

If you have children of school-going age, you’re probably all too familiar with the issue of school fees and the financial pressure this expense can place on your monthly budget.
For many of us, the option of paying school fees upfront or opting for monthly or quarterly payments could make a significant difference to our finances, but which of these options should we choose?
Making the Choice
School fees are billed as an annual amount, which can be paid in one of three ways:
(i)              The total amount can be paid at the beginning of the year,
(ii)            The fees can be divided into four quarterly payments, or
(iii)           The fees can be paid in 10 monthly instalments from February to November.
For parents who are in a position to pay the full amount upfront, most schools offer a discount on their fees which ranges from 5% to 10%, with the average being around 7.5%.
This saving is an incentive to pay fees upfront, and allows parents to free up their monthly budget since they won’t have to pay school fees each month.
My Personal Experience
As a financially minded person, I appreciate any organisation that offers me a discount on up-front payments. With this in mind, my husband and I decided to use his annual bonus to pay school fees up front at the beginning of last year. Since our two children attend different schools, we saved 10% and 7.5% respectively on our two school fees payments.
Throughout this past year, we saved the money that we would have spent on school fees each month and invested it in a mix of unit trusts. At the end of the year we made a net return of 13.2% and 23% on our two investments after costs, and were able to pay school fees upfront once again this year.
We were able to save on two fronts: getting an upfront discount on school fees and getting a great return on our monthly unit trust portfolio. We were therefore able to pay less in school fees due to the savings we had made. We saved around 20% on school fees, by doing it this way.
If you are interested in getting on the savings path, no matter how small the contribution, you can send me an email on sigrid@telkomsa.net. Even a small monthly contribution could put you on the right path.