It is January which means school has just started. It is fashionable for the press to publish the 20 most expensive schools in South Africa list. I had a near heart-attack when I read the list. When I calmed down, I had a think about it all and came up with some questions and/or opinions. Please note, this is my opinion and personal view. Some people seem to get really emotional when it comes to schools. You are entitled to your view and me to mine.
Let’s start with the number 1 school at a cool R250,000 per annum. Assuming that annual increases are only at inflation, you are in for R1.25million over 5 years in today’s money value.
A top former Model C school comes in just under R50,000 per annum. A total of R250,000 for 5 years.
So, you could save R1,000,000 over 5 years.
The question you have to ask is: Do you get an education worth R1,000,000 more by attending a fancy school. I can’t answer that question for you. I can only offer my thoughts. I present these below:
Let’s assume that expensive is a proxy for quality (it is not all the time!). If you can comfortably afford to send your child to a Top 20 school, then go for it. If, however, it is going to put you under serious financial strain, I would consider other options. Little Jonny or Julie should be just fine if they go to a less “exclusive” school.
“The school network is worth the school fee” argument.
Yes, these Top 20 school networks are strong. I have seen them in action in my short career – to a degree. In my humble opinion, I believe the strength of the network is overplayed. If you are rubbish at your job, you are rubbish at your job. It doesn’t matter which school you go to. It may get you in the door but if you don’t deliver, you will be shown the door quickly. Plus, if the only thing you have going for in life is your school network, I think you have more serious problems.
Human capital (which education assists in maximising) is only one part of the equation. Total capital = human capital + financial capital. This is where I tie this post back to Forget the Noise. Think of what else you could do with the money.
When your child finishes school, they have a long life ahead of them. Assuming you give them a good education (think top former Model C school or decently-priced private institution), you could be building them an investment portfolio. Imagine putting R200,000 a year for 5 years into a portfolio of dividend paying shares. Even R50,000 a year would help. In my opinion, this is what really giving them a headstart in life.
Of course, don’t just gift your child an investment portfolio. You can set up structures to ensure they don’t just blow it quickly once they get access. Also, you should teach them about shares, markets and business (admittedly, schools do a very poor job at this – no matter how much you pay for them!).
The point is I think there are other ways to ensure that your child gets both a good education and a head start in life.
(Aside: you could also help with the purchase of a first house. A large mortgage can be crippling)
If you can send your child to a Top 20 school, help set an investment portfolio, help with a house purchase and shower them with lots of love, then your child is a very lucky one. 🙂
For the rest of us, we need to have a long hard think at our options.
I understand that some may say I am biased because I didn’t go to a Top 20 school. I acknowledge that. I have tried to look at the problem in the context of someone who will have to be paying for schooling in the not too distant future. I also acknowledge that all the schools on the Top 20 list are excellent schools. I would love to be able to afford to send my kid to one of them. If, however, I can’t, I know there are plenty of other options where my kid will get a just as good education.
Wherever you send your child to school, try to teach them about investing. Buy them some shares (see EasyEquities) and teach them to Forget the Noise.
Lastly, I have friends from many different schools. Most of them have been successful. Perhaps, it is not the school the makes the man (or woman), but the man (or woman) that makes the school.
Here is the dividend data for this week: