5 questions every parent must ask before choosing an education savings plan

If you are a parent, you have likely felt the rising pressure of school fees, stationery costs, and the growing list of school activities. While many families save for education, far fewer have a clear plan showing how much they need to put away, which options may suit them, and how rising costs could affect their goals.

The best place to start is not with a product but with a personalised financial plan. All families’ circumstances are unique. The trick is to match the right financial solution to your goals, whether you want predictable contributions, tax-free growth, or higher long-term returns. A plan clarifies your time frame, priorities, affordability, and risk comfort before any product choice is made.

Parents should begin with the basics: their aspirations for schooling, the age of the child, how education costs may change, and how much flexibility they need. Once this is clear, the product becomes the final step, not the first.

Why a financial plan matters more than the product

Parents often underestimate how ownership, affordability, flexibility, and education inflation shape long-term outcomes. Ownership, for example, affects control. If an investment is in a child’s name, once the child turns 18, they will gain full access to the funds without parental consent. Parents who want to retain control may prefer to keep the account in their own name so they can “disinvest and use the proceeds to pay for the child’s education directly.

Rising education costs are another major factor. According to research conducted by Old Mutual, education inflation consistently outpaces salary growth, with increases running 2.5% to 3% above CPI each year. “Without planning for this, families may save consistently but still fall short of future needs,” says Mahapa. “A financial adviser can help quantify these pressures, weigh trade-offs, and calculate the future value of today’s education costs.”

The key questions that shape your education plan

Financial advisers typically guide parents through a set of questions that form the backbone of an effective education savings plan:

How many years remain before the funds are needed?

A longer timeline gives savings more time to grow, while a shorter one limits how much risk is appropriate. For longer-term goals parents can consider options like unit trusts or tax-free savings accounts, while bank savings accounts are better suited to short-term needs because they provide liquidity and security.

Do I prefer predictable contributions or flexible investing?

Some families want disciplined, fixed payments, while others need the freedom to change contributions. Unit trusts and tax-free savings accounts offer flexibility, while education policies with fixed monthly amounts suit those who prefer structure and predictability.

Is tax-free growth important for my long-term goals?

Tax-free returns can make a significant difference over time. TFSAs work best when you have a longer time horizon and can contribute consistently enough for the growth to compound. They are less suitable if you need frequent access to the money.

Will the funds need to be easily accessible?

Some parents need quick access for emergencies or changing school-related costs. Bank accounts and unit trusts (depending on the underlying assets) offer the most flexibility for short-term needs like stationery or uniforms, while education policies are least flexible and better suited to long-term costs such as tuition.

 How might education inflation affect future affordability?

With education inflation outpacing general inflation, your savings need to grow fast enough to keep up. Seeing that education inflation rises so quickly, growth-oriented unit trusts and tax-free savings accounts with market-linked investments offer the best chance of beating inflation. Bank savings accounts generally cannot keep pace and are better for short-term goals.

While calculators and tools can give parents a clearer sense of future education costs, their real value lies in supporting a structured, personalised financial plan that brings affordability, time frame, ownership, inflation, and risk together in one adaptable strategy.

The most effective way to make confident decisions is to speak to a financial adviser. They can help parents build a customised education savings plan and guide them through the questions that matter most.

* Mahapa is the provincial general manager at Old Mutual Personal Finance.

PERSONAL FINANCE