Education funding – the long-term cost families underestimate
Education funding – the long-term cost families underestimate
Craig Lawrence CFP®, Financial Planner, BDO Wealth
For many parents, the first conversation about education starts with a simple question: Where should we send our child to school? It is often asked years before a child’s needs or interests are clear. Yet behind that question sits one of the most significant long-term financial responsibilities a family will carry.
Education funding is a predictable, inflation-sensitive commitment that forms part of a household’s financial foundation. When it is not planned deliberately, it begins to compete with other core goals – most notably retirement.
Education pathways today are varied. Families may consider fee-paying public schools, former Model C schools, private schools or online options. Planning early does not lock in a decision. It preserves flexibility when decisions need to be made.
The data provides perspective
Between 2000 and 2025, average consumer inflation in South Africa was approximately 4.85% per year (Stats SA, CPI History, 2000–2025). Over a similar period, school fees increased at roughly 2.6% above inflation annually (BusinessTech, 2023). Education costs have therefore been rising closer to 7–8% per year over extended periods.
That difference compounds.
An average former Model C school currently charges approximately R70,000 per year in fees¹. Over 12 years of schooling, that equates to R840,000 in today’s terms – before annual increases and additional costs such as uniforms, sport and cultural activities.
What often surprises families is not the first year’s fee, but the cumulative effect over more than a decade. As increases compound, education becomes one of the largest expenses many households face outside of housing.
A 2024 consumer spending survey found that around 10% of monthly income is allocated to school fees (Wonga Consumer Survey, 2024). Education is already embedded in household cash flow. When costs rise faster than inflation and families do not plan explicitly, pressure builds elsewhere in the financial plan.
What would you need to save from birth?
If 12 years of former Model C schooling costs about R840,000 in today’s terms, what would you need to do to fund it?
A parent who saves from birth and achieves a long-term real return of inflation plus 4% would need to invest approximately R2,300 per month in today’s rands. Over 18 years, that equates to total contributions of roughly R500,000, with investment growth funding the balance.²
The earlier saving begins, the more compounding does the heavy lifting. Starting at age 10 instead of birth would require a materially higher monthly contribution because the time horizon is shorter.
If you have not yet started, the opportunity has not passed. As the well-known saying goes, the best time to invest was yesterday; the second-best time is today.
Where the pressure shows up
Recent retirement withdrawal data offers insight into how funding gaps are being absorbed. Research shows that once individuals access retirement savings early, they are likely to do so again (Moonstone Information Refinery, 2025). Education accounts for 25% of withdrawals, with peaks between December and February when school fees fall due (Moonstone, 2025).
The instinct is understandable. School fees are immediate and visible. Retirement is distant.
If a parent withdraws an amount equivalent to one year’s average former Model C school fee – approximately R70,000¹ – from retirement savings at age 35, the cost extends far beyond that amount. Assuming a real return of inflation plus 4% over 30 years, that capital could have multiplied several times by retirement. What is forfeited is not only the capital, but the compounded growth on that capital.
This applies whenever education is funded reactively from long-term savings. Capital intended to compound over decades is redirected to meet a short-term obligation.
When asked to rank children’s education against retirement, most parents will prioritise education. The better question is whether planning began early enough to avoid that trade-off.
A practical approach
Education funding does not require complexity. It requires structure and consistency.
Start early
Time reduces pressure. Beginning when a child is born allows smaller contributions over a longer horizon. Delaying increases reliance on current income or other savings. If you did not start at birth, the opportunity has not passed. Starting now – even with a modest amount – is more effective than postponing the decision.
Invest with the right objective
If school fees are rising faster than inflation, savings must grow accordingly. Over longer periods, this typically means diversified growth assets rather than relying solely on cash or fixed deposits. Cash has a role in the short term. Over 10–15 years, however, it often fails to keep pace with education cost inflation.
Ring-fence education savings
Separating education funds from general savings reduces the temptation to access them during financial strain.
Budget deliberately
Education should form part of long-term cash flow planning, alongside bond repayments and retirement contributions. Financial management is learned behaviour, not a function of income (Moonstone, 2025).
The retirement implication
South Africa faces a retirement adequacy challenge. Many households are under-saving relative to what they will ultimately require. When retirement savings are accessed to fund education, that challenge deepens.
Education spans just over a decade. Retirement may span 25 to 30 years or more. Using retirement capital to solve short-term funding gaps interrupts compounding and reduces long-term security.
Small withdrawals may appear manageable in isolation. Over time, their cumulative effect can materially reduce retirement capital.
Planning removes the tension
Parents will continue to prioritise their children. That instinct is not in question.
The role of sound financial planning is to remove tension between competing goals. When education funding is structured early and consistently, it becomes manageable. When it is deferred or funded reactively, pressure builds and difficult trade-offs follow.
Education and retirement do not need to compete. With deliberate planning, they can coexist within a sustainable financial framework.
Sources
Statistics South Africa. Consumer Price Index History (2000–2025).
www.statssa.gov.za/publications/P0141/CPIHistory.pdf
BusinessTech (2023). School fees have crushed inflation for over a decade in South Africa.
Moonstone Information Refinery (2025). Two-pot system reshapes behaviour, but retirement gaps remain.
Wonga Consumer Survey (2024). South African household spending patterns.
¹ Average annual former Model C school fees based on publicly available fee schedules from selected Cape Town former Model C schools (e.g., Rondebosch Boys’ Schools; Westerford High School).
² Illustrative calculation: Present value R840,000 funded over 18 years at a real return assumption of 4% above inflation, level real monthly contributions of approximately R2,300. Total real contributions approximately R500,000. Figures rounded for illustration.