Save for an education overseas

11/03/2019

Save to study overseas with these types of investments

If you are looking for education options outside of South Africa, it’s important to start saving or investing as early as possible. When it comes to growing your wealth, your first step is to partner with a bank that offers the best interest rates.

There are many types of investments available in South Africa. Before investing, you need to consider creating a savings plan. This plan will determine the length of the savings period and can thus provide a better idea of where to put your money. For instance, if you are looking for a short-term investment, say for a period of 3-5 years, you could consider choosing a riskier investment option which can result in high capital growth over that shorter period. Alternatively, if you have a longer period for saving, you will look for a less volatile and more stable growth option with the best return on investment.

Of course, there are other factors to consider, such as whether or not your selected educational institution offers financial aid. Ultimately financial aid from educational institutions are most likely to be dependent on a points basis. Bursaries are an attractive offer but they are extremely rare and are only limited to a few individuals.

Here are just some of the many options you could look into when it comes to investing:

Fixed deposits Investment

An investment in a fixed deposit is a once-off investment into a savings account for a fixed period. You will receive a guaranteed return with a fixed interest rate. The interest rate is dependent on the period selected. This is a good way to invest your money with a guaranteed return on investment as the risk is low. An option provided by this fixed deposit is the pay-out option. You have a choice to receive your interest pay-outs on a monthly basis, yearly basis or at maturity. Seeing as you are looking to grow your money as much as possible to pay for the education, it would be best to leave your interest until maturity because then you benefit from compound interest.

Did you know African Bank has a Fixed Deposit account? Click here for more info.

Tax-free investments

Choose to save your money without paying income tax, dividends tax or capital gains tax. A tax-free investment is a favourable option to save and grow your money. A tax-free investment is limited to a maximum contribution of up to R33 000 per annum and a lifetime maximum contribution of
R500 000. This is a smart way to save your money as you are free from tax. You have the option to open up a tax-free account for your child at a young age and save the money that is needed to pay for the education overseas. There is no limit on the number of tax-free accounts that an individual can have as long as the annual contribution amount is not breached and that the minimum amount is maintained in each product.

Notice accounts

Another way to save your money could be with a notice account. A notice account is when you deposit money into an interest-bearing savings account and you choose a period when you want to access these funds. The notice period is usually given by the investor. As an investor, you could set up a notice account to pay for your child’s education in another country. Once you have the total cost of the education, you could set up a monthly debit order to contribute to this notice account and advise the financial institution as to when you require to receive the funds. Interest rates on a notice account are usually market related. They may vary according to what’s happening in the market which makes them a riskier option.

If the option to invest in a South African savings account is chosen, keep in mind that the money has to be converted into the foreign currency. The term of your investment is a crucial factor of the savings plan. You can use the term of the investment to determine your risk appetite. A higher risk results in a higher return and vice versa. Ultimately, you will want to grow your money in a way that best suits your financial needs and goals.

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