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How Tax-Free Savings Could Fund Your Child’s Education

Sending your child to university is pricey which is why parents need to start saving as early as possible for their child’s future.

Investec Specialist Bank and Asset Management

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Five South African universities have been included in the Times Higher Education BRICS & Emerging Economies Rankings 2015 – a list of the top 100 universities in countries classified as emerging economies.

The ranking reportedly looks at all core missions of a world-class university, using carefully calibrated performance indicators.

The University of Cape Town (UCT) ranked 4th in the list, with the Universities of the Witwatersrand and Stellenbosch at number 14 and 17 respectively.

Much further down in the assessment, the University of KwaZulu-Natal came in at 47 and the University of Pretoria ranked 77th. Accolades such as this bolster an institution’s reputation, but in terms of student registration, the biggest barrier to entry for many prospective students, is the cost.

Related: Three Funds You Can Tap into Right Now

The exorbitant cost of attending university in South Africa means that for many parents planning the options for their child’s tertiary education, this route is simply not a financially viable one.

Many universities have levied annual fee increases well above inflation year-on-year – a point noted by Higher Education and Training Minister Blade Nzimande earlier in the year. Declining government funding has been blamed for this, but the end result is a university degree that’s simply too expensive for household budget’s already under pressure.

No time like the present

If parents start saving early enough for their child’s tertiary education, enrolment at a South African university suddenly becomes a possibility.

According to René Grobler, Head of Investec Cash Investments, the sooner parents begin contributing to an investment plan, the sooner their money can begin working for them and thanks to National Treasury’s new tax-free savings initiative launched on 1 March, that time is now.

“Treasury’s confirmation that parents can open a tax-free savings account for each of their children provides the optimal mechanism to begin saving literally from as soon as your child has an ID number,” says Grobler.

Introduced in a bid to turn the tide on non-savings, the tax-free savings initiative aims to stimulate saving over and above retirement-based savings. This provides an excellent opportunity for parents to take advantage of this compelling opportunity to save for their child’s education.

Make education your goal-based saving

As an example, if a parent started contributing R30 000 per year into a tax-free savings account with a 7% fixed interest rate, before their child turns 17, they would have met the current lifetime contribution limit of R500 000.

If they left this in the tax-free savings account until their child turns 18, thanks to compound interest (at a constant rate of 7% per annum) their accumulated savings would have grown to R1,04 Million. A valuable investment in anyone’s language.

Minister Blade Nzimande agreed to a meeting with vice-chancellors to discuss various issues, including what is responsible for driving high costs at universities. But currently, typical first year tuition fees for a student studying a straight BCom at UCT range from R50 000 to R62 500.

According to Grobler, parents using a tax-free savings account to save for their child’s future should regard the investment as a long-term one.

“For clients who exercise the restraint required to leave their investment for the full term, thanks to the positive effects of compounding interest, they will reap the most benefit,” she says.

Related: Taking South African Financial Skills to the World

While Treasury has stipulated that the tax-free savings account offers full liquidity within 32 business days in the case of an emergency (with a minor product-specific penalty fee applying) without any prescriptive terms and conditions on its usage, clients should note that the account cannot be reimbursed with the withdrawn amount at a later stage.

Withdrawals will therefore negatively affect the tax-free growth of the investment over time. Also, it’s important not to exceed the annual or lifetime maximum contributions, since any amount over these thresholds will be taxed at 40%.

Investec Cash Investments falls under Specialist Banking and offers cash solutions to individuals, small businesses and financial intermediaries. Clients can choose from a range of cash products with guaranteed capital and highly competitive annual returns, ranging up to 9.2%*. These savings and cash investment products offer capital preservation, a high level of security and exceptional returns with various levels of accessibility. There are no fees attached.Investec provides a wide range of financial products in South Africa through its Specialist Banking, Asset management and Wealth and Investment divisions.

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Forever Learning, Discovering And Empowering

From work-life balance to finding the right support, Constance Kawelenga CA(SA), director and owner of Zuva Financial Services, shares her top tips on how to manage a successful business as a sole proprietor.

SAICA

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“Every business has its own slice of the market; one just needs to define their service offerings and target market.”

“When I established Zuva Financial Services, it was under the ‘illusion’ of a work-life balance. I say ‘illusion’, because when you work for yourself, you put in just as many hours, if not more, than when you work for someone else.

“I also wanted the flexibility to be able to shape my working space around my own lifestyle and family, and not to have to account to anyone else. The rigorous training to become a chartered accountant taught me to be highly disciplined. That means when I work for my own business, I am just as tough on myself, if not tougher, than any boss would have been in a different setting. The plus for me is that I am able to be there for my family when I need to be, and compensate for this in a way that best suits my lifestyle.”

Being your own boss has its pros and cons. However, for Constance, it is all worthwhile. Setting targets for her business every year and achieving those targets is deeply satisfying. Again, this is something she attributes to her training — she values client success and feedback.

“Whenever I get affirmation from clients regarding the value that we are adding to their business, and they refer other clients to us, I celebrate those achievements. The growth of Zuva Financial Services’ has resulted mostly from referrals or word of mouth and that, to me, is a testimony to the value that our clients place on our services.”

Related: The Power Of Finding Your Why

Overcoming a lack of internal support

The hardest thing about being the owner of Zuva Financial Services for Constance is the lack of an internal support structure. However, Constance has developed a network of technical specialists that she can call upon to consult. She agrees that technical support remains the toughest challenge of being a sole practitioner.

“We offer a mixed bag of services such as accounting, taxation, secretarial, payroll and even Black Economic Empowerment consulting. Additionally, I have audit clients — some in industries with specific reporting requirements such as estate agents and attorneys working with trusts. On a smaller scale, the breadth of services is almost the same as those offered by bigger firms. The difference is that I don’t have the internal resources such as a technical department.

Prior to establishing Zuva Financial Services, Constance spent six years in audit, mostly in Zimbabwe, but also in Botswana and South Africa. Since then, she has also been exposed to other financial roles, where she fulfilled financial management roles for different organisations such BMW Financial Services.

Constance advises those aspiring to follow in her footsteps and open their own companies not to overthink it, or doubt themselves.

Related: Can Computers Replace Human Accountants? We Doubt They Can

Don’t overthink it

”It took me such a long time to take my first step because I could not believe that I would be able to build up a client base. Today, there are times when I am overwhelmed by the workload on my plate. It reminds me of my mother-in-law’s advice when I started my business. She told me that every business has its own slice of the market; one just needs to define their service offerings and target market.”

Constance describes herself as “forever learning, discovering and empowering.” She adds: “We each have a unique walk in life — ours is to boldly step out and embrace it”.

Visit www.saica.co.za

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TuksNovation – Accelerated Innovation With The University of Pretoria

The University of Pretoria’s high-tech business incubator will be launched on the 6th of August by Minister Zulu, Department of Small Business Development at UP – Hatfield Campus, to alleviate the serious challenges related to unemployment South Africa is faced with.

University of Pretoria

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According to Trading Economics (2017), the youth unemployment rate in SA is extremely high at 55,9%. The University of Pretoria is aware of this challenge and has embarked on launching a high-tech business incubator and accelerator.

This business technology incubator, known as TuksNovation, will promote job creation by providing support for the commercialisation of technology, networking, mentoring and sustainable spin-off technology companies.

Fuelling the economy

In a knowledge-driven economy, universities play a major role in regional socio-economic development. Innovations arising from a university’s intellectual capital can stimulate economies through new product development. Universities are therefore highly valued in terms of economic potential.

Although the creation of spin-offs is one of the key mechanisms that universities can leverage to promote socio-economic development, few universities in South Africa have done so, and the impact has been very modest. This low success rate can be attributed to the absence of an entrepreneurial culture, limited access to funding, as well as technology transfer offices at universities that lack critical skills and capacity.

Related: The Power Of Life-Long Learning with University of Pretoria

The elements of success

TuksNovation is based on the triple helix model of Etzkowitz and Leydesdorff (1995). According to the University of Stanford Human Sciences and Technologies Advanced Research Institute (H-STAR) (2011), the triple helix concept comprises three basic elements:

  1. It allows universities to play a more prominent role in innovation, on par with industry and government in a knowledge based society.
  2. There is a movement towards collaborative relationships among the three major institutional spheres, in which innovation policy is increasingly an outcome of interaction, rather than a prescription of government.
  3. In addition to fulfilling their traditional functions, each institutional sphere also performs 34 new roles. Institutions that are currently taking on non-traditional roles are viewed as a major potential source of innovation.

Over the long-term, the business incubator aims to enable the development of industrial clusters with a positive economic impact in Tshwane. It is set up in partnership with the Department of Small Business Development’s Small Enterprise Development Agency (SEDA). 

How it works

TuksNovation aims to build strong networks among academia, government and industry to create new spin-offs that can benefit society. According to Prof Elma van der Lingen, Chairperson of the Graduate School of Technology Management (GSTM) at the University of Pretoria, the TuksNovation model is based on allocating seed funding to students who are keen to become entrepreneurs and are conducting research on projects that have the potential to develop commercially viable technology.

“Annual TuksNovation competitions will be held on campus and interested students will be able to participate in order to qualify for TuksNovation seed funding to develop their ideas into commercial products,” she says.

The competitions will have strict guidelines and will be evaluated by a committee comprising mainly representatives from industry and technopreneurs. The technology development phase of the projects will be conducted in a virtual incubator in the University’s laboratories and at facilities at local industries.

The students will receive expert technical guidance from academics at the University, as well as technological entrepreneurship training. Various in-kind contributions will also flow from building strong industry networks.

Some benefits from this relationship could include:

  • The use of industry facilities
  • Research on industry-related problems
  • Employment for students and mentorship.

Related: Small Enterprise Development Agency (Seda)

Funding for the business phase of the projects is secured from external funders, such as venture capitalists, investors, and corporations.

Students with commercially viable technology will make pitches and submit business plans to potential investors in order to secure funding. SEDA covers the incubator’s initial operational costs. TuksNovation will initially support the development of spin-offs in the Faculty of Engineering, Built Environment and Information Technology, but will expand to other faculties involved in science and technology at UP, depending on the availability of funding.

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Knowing The Basics Is Not Good Enough Anymore

Being able to confidently speak and write in English has never been so important. Using the right words in the right way can make a massive difference to any company.

Wits Language School

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Do you know the difference between “organize” and “organise”? Do you believe “device” and “devise” are the same thing? Do you think a comma and a semicolon could be used interchangeably? Why is “talk about” considered informal language? How does one create cohesion in your writing?

Few people in the business sector ask these questions; it could be because they do not focus on the language they use in business correspondence or, as second language speakers of English they do not know the answers. With many pupils in South Africa receiving basic education in their mother tongue, many enter the business sector not knowing the basic rules of how to articulate an idea coherently or cohesively. It is often when they are asked to compile a formal business report or prepare a presentation that few realise the importance of upskilling their English proficiency.

At the Wits Language School’s English Communication for Professional Development unit, that is the main focus: Enhancing participants’ English language skills for the business environment in an interactive manner. Whether you need to go back to the basics; learn how to write and edit emails, proposals, memos, minutes or reports; enhancing your speaking and pronunciation skills in order to deliver confident presentations; or practise your critical thinking skills when using English in your everyday life, there is the right course to fit your needs and help you climb that corporate ladder by focusing on what many regard as a “soft skill”.

Related: Tips To Becoming Fluent

Business English students can generally be classified into two sections: those who recognise the need to address their language skills, and those who believe they do not need any language training. The first group often walks into a class not knowing what to expect and leave with more confidence in their English spoken and written forms. The second group leaves the class understanding language structures better and rely more on grammar and writing rules than on what “sounds right”. Regardless of the group you might fall in, participants who successfully complete the courses gain knowledge, understanding, confidence, a higher aptitude in English and critical analysis of the language they are expected to converse in.

Take for example the following sentences – “I write reports”, “I am writing a report”, “I wrote a report”, “I have written a report”, “I have been writing a report” and “I had written a report”. Although all of these sentences are grammatically correct, they are very different in meaning and intention. “We could invest”, “We must invest”, “We might invest” and “We should invest” indicate different intensities and degrees, and “Please see attached” is better than writing “Kindly see attached”. One should avoid using a colon after a verb or preposition when you list things, and “U.S.A.” and “USA” refer to two different writing styles (one of which is preferable in South Africa).

Today, many companies are recognising the importance of English in the workplace as a way to create better internal and external communication, as well as creating uniformity in general forms of correspondence and business documents. While some companies offer their staff financial assistance in upskilling themselves, other companies opt to complete training as a group. With classes being presented in a communicative and fun way, English training has never before been made more accessible and exciting. Public classes run every Saturday over a 10-week period, while more customised corporate training takes place during the week at a time and place convenient for the client. Participants often comment that they start to analyse, question and edit their writing more critically and that their superiors at work see a marked change once they start a short course from Wits Language School.

Read next: How English Language Skills Play An Essential Role In Building Trust With Your Customers

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