To shed light on this evolving trend and offer insights into strategic financial planning, Rex Cowley, director and co-founder of Overseas Trust & Pension, shares his expertise.
International education and travel offer youth invaluable opportunities to gain a global perspective, develop intercultural skills, and build diverse networks.
Exposure to different cultures and educational systems enhances adaptability, critical thinking, and communication skills - attributes crucial in today’s interconnected world. Moreover, such experiences open doors to prestigious universities and global career opportunities.
This trend reflects the aspirations of South African families, who aim for expanded educational horizons, stronger familial bonds, and enhanced financial security for their children.
Key motivations driving South African parents to explore international opportunities include pursuing high-quality education.
Many perceive international universities as offering superior academic experiences, invaluable global networks, and diverse cultural immersion, particularly institutions in the UK, USA, and other highly esteemed countries, which further reinforce this perspective.
The current digital age has paved the way for access to international education. Online courses supplemented by short-term residencies offer cost-effective alternatives to full-time overseas study.
However, the desire for immersive international experiences highlights the need for thorough financial planning.
Parents must navigate numerous financial considerations when planning for their children's education abroad.
International education can be prohibitively expensive, particularly for international students. At a recent financial planning conference focused on retirement, Cowley stated that various investment strategies were explored.
One notable example involved regular savings of R150,000 invested per annum from 2009 to 2024. The analysis examined how this amount if invested simultaneously in the JSE and the S&P 500, would perform over time.
For instance, if someone started saving R150,000 in 2009, their investment could grow to R11,941,074.83 by 2024 if invested in the S&P 500. This growth could enable significant financial goals, such as educating a child overseas or purchasing property for student accommodation.
Studying in the UK, for example, can exceed £35,000 (R770,000) annually, covering tuition, accommodation, and living expenses. Hence, early and strategic financial planning is imperative to manage these costs effectively and ensure a seamless transition for their children.
A robust strategy involves saving anticipated expenses in the currency to mitigate currency fluctuation risks.
Given the relatively short investment horizon - from high school to university - a balanced approach should be prioritised, incorporating inflation-linked investments and growth assets.
Planning extends beyond education to long-term benefits, such as acquiring a second home in the destination country.
This serves dual purposes, providing accommodation during the study period and potentially serving as a retirement or vacation home for parents.
Cities like Manchester, London, and Edinburgh are popular for their suitability as student accommodations and future family homes, offering parents security and stability.
Furthermore, many parents contemplate relocating closer to their grandchildren as their children settle abroad. Depending on feasibility and personal circumstances, this may involve purchasing a second home or permanent immigration.
Financial planners and wealth management experts guide parents through the intricate landscape of preparing for their children’s international pursuits.
Cowley adds: “Advising on an investment strategy is pivotal; recommending a balanced approach ensures steady growth while protecting against significant value fluctuations over the savings period. Furthermore, long-term planning discussions should extend beyond education to encompass broader implications such as acquiring property abroad and preparing for eventual family reunification.”
An effective investment strategy is essential for achieving a successful future, enabling families to navigate the complexities of international education planning with confidence and foresight.
Cowley also states that using foreign products to provide for education or post-educational needs can enhance the likelihood of achieving the desired outcome. For example, international preservation funds provide asset protection, a degree of tax efficiency, and access to funds when needed.
