Your little dear will be very dear

February 21, 2011

The astounding figure includes medical aid expenses.

The research by Sanlam, Old Mutual, Discovery Health and Metropolitan Life reveals that child-rearing costs have soared since 2007. But the financial planners and researchers said these figures reflected middle- and higher-income parents.

Though not as steep, the figures for lower-income families are just as unsettling.

A young family earning a combined monthly income of R10000 would have to invest R1400 a month to afford their children’s projected R650000 education bill, from nursery school to tertiary level.

The cost of raising a child varies enormously, depending on one’s income, in what part of the country the child is raised, where it is educated and a slew of other factors.

Economist Tony Twine said a middle-income household with a R500000 annual income could expect to pay R2.5-million to raise a child.

“A R2-million-a-year household can expect to pay a lot more,” he said. “The higher the income the higher the expenses.”

The latest statistics from the financial institutions also revealed that:

* From birth to the school-going age of seven, parents ought to save about R601 a month for primary school education at a government school. Monthly savings for a private school education amount to about R2992;
* The total fees for a primary school education, from grade R to grade 7, amount to about R57198 at a government school and R284615 at a private institution;
* High school will set parents back about R86997 at a government school and R390000 at a private school;
* A monthly saving of about R1516 would fund a child’s entire school education – from grade R to 12 – in a government school and R7100 a month for private school education;
* Parents with a newborn baby need to save at least R2800 a month if they intend for their child to pursue a medical or engineering degree, which would cost more than R1.2-million; and
* Parents will have to fork out about R300000 in medical bills for a child born this year up until the age of 18.

“Consider the costs of extra-curricular activities … and cellphones and other gadgets which are almost a norm today. These all cost money,” said Sylvia Walker, Old Mutual’s market development manager.

She said financial planners excluded in their calculations the cost of a pram, car seat, baby formula, crib, nappy creams, dummies and designer jeans once the kids were ready for school.

Durban-based estate agent Kim Woods said young couples planning to start a family or with a newborn baby often looked for bigger home.

The latest house price index compiled by Absa puts the price of an average middle-class home at R966500, compared withR1.4-million for a larger upmarket home.

“Most new parents,” said Twine, “are unaware of the long-term costs of raising a child. They are incapable of budgeting for a whole year, let alone 20 years.”

But even high-income earners battle to save for their children.

“It’s the biggest tragedy when we see parents earning a combined income of more than R100000 a month struggling to set aside R5000 for school fees,” said Asogan Naicker, a director of a financial advisory consultancy.

“They have created a lifestyle that has now become unaffordable … and have not taken into account the long-term costs of raising children,” he said.

Danelle van Heerde, who heads Sanlam’s personal finance division, said: “Our figures show that education tops the list of saving priorities for low- to middle-income earners, while high earners see the cost as just a monthly expense.”

Three families with varying incomes tell SUBASHNI NAIDOO how they budget for their children

On a salary of just R2500 a month, single mother Cynthia Khawula pays her two sons’ school fees, electricity fees and her grocery bill. She also puts aside money for medical expenses.

The 35-year-old domestic worker, who lives in KwaZulu-Natal’s KwaMakuta township near Amanzimtoti, lives on a strict monthly budget and has started investing R200 a month for her children’s tertiary education.

But she knows that her investment may not be enough.

Her eldest son, Nhlakanipho, 10, is in grade 3, while her 4-year old, Innocent, is in preschool.

“I try to keep my expenses as low as possible. But education is my priority. At the end of the day all I want is the best for my children,” she said.

Khawula’s meagre budget often means there’s no money for meat or clothing.

The rising cost of living has forced her to do almost “twice as much on the same salary”.

Her greatest concern is funding her children’s high school education.

“I fear to think what it will cost me … but for now they are doing well at school and are the happiest with the little I provide.”

Ad executive and company owner

Advertising executive Linda Nxumalo, 33, splashes out R3 000 a year for her six-year-old son’s swimming lessons.

And that’s not all. Nxumalo and her husband, Ntokozo, 33, who owns a project management company, also pay just over R25000 a year in school fees for both their children, Bayanda, 6, and 18-month-old Mawande.

Then there are the additional costs for extramural activities, toys, and satellite television.

About R7000 a month goes on school fees, clothes, nappies, meals and baby essentials.

Last year the couple spent more than R7000 on their children’s birthday parties.

But this middle-class lifestyle hasn’t come without sacrifices.

Linda says that when they decided to have Mawande, they cleared all unnecessary debt, stopped impulse buying and saved.

“Things have become expensive for us now that we are raising two children. The fees for daycare have increased significantly as well as salaries for domestic workers,” Nxumalo said.

The birthday parties, although a luxury, were essential for their children, she said.

The couple, who live in Pinetown near Durban, acknowledged that medical aid, school fees and saving were now priorities.

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