Fundisa – it’s a no-brainer!
PLEASE BE AWARE THAT THE EXPLANATION OF FUNDISA’S RETURNS IS INCORRECT – IT WILL BE CORRECTED IN A LATER POST. Gregg
Currently the cost of a university degree is about R31000-R35000 per year, so over 3 years that is pretty much R100000. If varsity fees continue to increase at levels above inflation then this will increase to somewhere between R200000 and R300000 per year for my 3 year old son. That’s between R600000 and R900000* for a 3 year degree in 15 years time.
At a return of 5% better than inflation, you would need to save about R1800 per month (escalating with inflation each year) for 15 years to get there. This is on top of your bond, car, medical aid and school fees!
On the face of it, that’s out of reach for just about everyone…unless you make use of the Fundisa education savings offering (see April 2009 post for more on this amazing offering).
The bottom line is that if you use Fundisa at R200 per month, for 15 years and the government continues to pay the 25% annual bonus and you get an average 10% return from the fund, then you will have ±R1.2million in 15 years time. This is more than enough to pay for the average 3 year degree.
If you start saving into Fundisa when your child is born, then 18 years later, you should have ±R3.4 million in the fund…you could probably pay for a full medical degree for 2 and still have some change! This is because at a return of 35% per annum, the value of your fund should double almost every 2 years. And I doubt if you will ever get a “guaranteed” return of 35% for 18 years in a row anywhere else.
Surprisingly, the uptake of Fundisa has been relatively poor – the cynic in me says that this is because there is no commission on the product and so there is no incentive to sell it. Whatever the reason, if you have kids and you hoping to send them to study at a tertiary educational institution one day, and you are not yet taking advantage of this incredible offer then you are very foolish and it is time that you got “fundisa’d”#. It’s a no-brainer!
*this assumes escalations of 12 & 15% per annum.
#For those that speak Xhosa – excuse the pun. For those that dont, “fundisa” is a xhosa verb meaning “teach”.