This is according to Old Mutual regional marketing manager for the Western Cape, Piet van Zyl, who warns that if parents do not start saving for their children's education soon after birth, they could be faced with serious belt-tightening once their child embarks on tertiary education.

School fees skyrocket

Education costs have skyrocketed by more than six percent per year over the past three years. According to Old Mutual's cost calculations, parents can expect to pay around R148 000 at a good government school for children starting school in 2009. The stakes go up for private schools, where the cost of educating a child starting school in 2009 is expected to top R553 000. This excludes food, clothes, toys, medicine and the myriad of other expenses that a young person might need before leaving school.

At tertiary level, a young adult starting a three-year commerce degree in 2009 will need to fork out R87 225, while a six year degree in medicine will cost R220 066.

For parents who have up to now neglected to make any provision for their child's education savings, these projections are a cause for serious concern.

Mis-spending on lifestyle to blame

In Van Zyl's experience, one of the reasons why parents find education costs unaffordable is because money is often mis-spent on expensive cars and other plush lifestyle accessories. Another reason is the widespread tendency to pay for education out of individuals' current income, which severely impacts their disposable household income.

Many cash-strapped parents have consequently turned to money lenders, who offer crippling high interest rates (easily adding up to double the initial borrowed amount) and unfavorable repayment conditions, as the only way to fund their children's education.

Build up an education fund

However, Mbulelo Kwali, financial adviser at Old Mutual, believes that parents can in fact manage to pay for their children's escalating education costs if they plan correctly from early on in the child's life.

In Kwali's opinion, a better solution for parents to cope with rising education costs, rather than borrowing, is to build up an education fund. This can be done by, for example, investing in unit trusts, which are among the ideal savings vehicles for either long-term or short-term savings requirements as money can be easily accessed when needed. Parents should be on the look out for investment vehicles that offer flexibility and should consult their financial adviser accordingly.

There are no guarantees that parents will live until a child goes to school or even to see them pass matric, Kwali points out. Therefore, there is a need to start saving now, with the focus on putting a small amount aside every month that will grow over time. "In this way, parents will be able to build up their savings as well as save a lot of money on interest that would otherwise be charged on a loan," he says, emphasising that the earlier parents start to save for their child's education, the better.

Concludes Kwali: "As life insurance companies continue to review the costs of investing in their products, saving for one's child's education is becoming increasingly affordable and manageable for parents and should therefore be a priority."