Give your child a financial head start

Raising a child is one of life's greatest joys - but it's also expensive. From nappies to school trips to university fees, the costs add up fast. And the reality is that education costs in South Africa rise faster than inflation every year. By the time your child reaches university, tuition fees could be double or even triple what they are today..

That's why planning ahead is crucial. A Tax-Free Savings Account (TFSA) is one of the best ways to build an education fund that grows without being taxed on interest, dividends, or capital gains. The sooner you start, the bigger the safety net you create for your child's future.

The rising cost of education in South Africa

Let's break it down:

• The cost of a public school education (excluding boarding fees) from Grade 1 to Matric can exceed R1 million.
• A private school education could cost over R3 million in total.
• University fees today range from R40,000 to R80,000 per year, depending on the degree. By the time your child reaches university age, these fees could double.

With costs like these, saving consistently is key. The good news? A TFSA helps you grow your child's education fund faster, because every cent of growth stays in your pocket.

How a TFSA helps parents save for education

• No tax on earnings - Unlike other savings or investment accounts, all the interest, dividends, and capital growth are yours to keep.
• Flexibility- Unlike structured education policies, you can access the money whenever you need it - whether for school fees, uniforms, or university costs.
• Long-term growth - The earlier you start, the more your savings benefit from compound interest.
• No limits on what you save for - If your child receives a bursary or scholarship, you can use the money for something else - like their first car, flat or a gap year!

Case study: How a TFSA can pay for your child's education

Imagine you open a TFSA when your child is born, saving just R1,500 per month in a moderate investment that earns 7.25% return per year.

• After 10 years, you'd have over R260,000 saved.
• By the time they're 18 and ready for university, your TFSA could be worth over R1 million.

That could cover a full degree without needing student loans or extra financial stress.

Smart tips for using a TFSA for your child's education

1. Start as early as possible - The longer your money has to grow, the bigger the payoff. Even small contributions add up over time.
2. Stay within the limits - The annual contribution cap is R36,000 and the lifetime limit is R500,000 per person.
3. Invest in growth assets - Since you won't need the money immediately, consider investing in ETFs or unit trusts to maximise long-term growth.
4. Use it strategically - You don't have to withdraw all the money at once. You could cover Matric expenses first, then continue growing the fund for university.

The bottom line

A TFSA is one of the most effective ways to save for your child's education. It's flexible, tax-free, and builds long-term wealth that can ease the financial burden of school and university fees.

The best gift you can give your child isn't just an education - it's financial freedom. So start a TFSA today and invest in their future!