For many parents, the question isn’t whether to fund their child’s education – it’s how to do it. With tuition fees rising and inflation eroding purchasing power, families are faced with a critical decision: do they start saving early, or wait and rely on an education loan later?
Both options fund education, but their long-term impact differs significantly. Understanding these differences can help parents plan smarter and avoid financial strain.
SAVE NOW OR PAY MORE LATER?
“The choice between saving and borrowing is one of timing,” says Marius Pretorius, Head of Marketing Retail Savings and Income at Old Mutual. “Saving early gives you control over costs, while borrowing means committing to repayments that could stretch years beyond your child’s graduation.”
A loan may seem more manageable at first – no upfront sacrifice, just repayments when needed. But delaying savings often means paying far more overall. Here’s why:
- Saving grows your money over time – The earlier you start, the more compound interest works in your favour.
- Loans cost far more than you borrow – Interest rates on study or personal loans can double the total amount repaid.
A Practical Example
Let’s compare two parents who both need R572 702 for their child’s Bachelor of Science degree in Gauteng, 17 years from now. *
| Parent A starts saving earlySaves R1,500 per month from birth.Earns a modest 8% annual return on investments.By age 18, savings have grown to R622,000 – covering tuition in full. *** Old Mutual Investment Calculator | Parent B waits and takes a loanBorrows R572 702 when their child starts university.Repays over 10 years at 10% interest.Ends up paying R1.2 million in total repayments. * *Standard Bank student loan calculator |
Parent A contributes R324,000 in savings over 18 years. Parent B repays nearly four times that amount over a decade due to interest.
THE TRUE IMPACT OF LOANS ON FAMILY FINANCES
Educational debt can impact a family’s overall financial health, affecting both parents and children.
How loans can affect parents:
- Long-term financial burden – Many loans take 5 – 10 years to repay, limiting savings for other goals.
- High-interest costs – The longer the repayment period, the higher the total cost.
- Increased financial stress – Debt adds pressure, especially if unexpected expenses arise.
How loans can affect children:
- Starting life in debt – Graduating with financial obligations can delay career and life goals.
- Delayed financial independence – Many young adults with study debt struggle to afford housing, investments, and savings.
- Extended parental dependency – Graduates with high debt often rely on parents for financial support well into adulthood.
“Debt should be a last resort, not the default plan,” says Pretorius. “A structured savings approach helps avoid these long-term financial pressures.”
A FREE DIGITAL TOOL TO HELP YOU GET STARTED
Many parents want to save but aren’t sure how much to put away or how savings compare to taking a loan. Old Mutual’s Savings vs. Loans Calculator helps parents make informed decisions by:
- Showing how much to save based on education goals.
- Calculating the real cost of borrowing, including total interest repayments.
- Comparing the financial impact of saving early vs. taking a loan.
It’s a simple, practical tool that removes the guesswork from education planning – and best of all, anyone can use it, whether you’re an Old Mutual client or not.
NEED HELP GETTING STARTED? SPEAK TO A FINANCIAL ADVISER
While an online calculator is a great starting point, every family’s financial situation differs. Whether you’re juggling financial responsibilities or just unsure where to begin, professional guidance can make all the difference.
“The longer you wait, the tougher it becomes,” says Pretorius. “But getting started doesn’t have to be overwhelming. Speaking to a qualified financial adviser can help you find a solution that works for you.”
A financial adviser can:
- Assess your current financial situation and help balance education savings with other priorities.
- Recommend savings options that align with your budget without overburdening you.
- Help maximise tax benefits and choose structured savings plans for your unique needs.
Professional guidance gives you clarity and confidence to move forward with realistic, achievable steps.
THERE’S NO BETTER TIME TO START
Funding your child’s education is one of your most important financial decisions. The choice between saving and borrowing isn’t just about affordability – it’s about financial security, flexibility, and peace of mind.
By starting early, you stay in control, avoid unnecessary debt, and create opportunities for your child – all while protecting your own financial future.
“Every parent wants to give their child the best education possible,” says Pretorius. “With a solid savings plan in place, you can do so with confidence – knowing that when the time comes, you’ll be ready.”
Take the first step today – use Old Mutual’s Savings vs. Loans Calculator or call 0860 66 66 59 to speak to a financial adviser.
*Old Mutual data: Investment strategies are taken at their target midpoint. CPI (Consumer Price Index) or inflation is set at 5% per year. Education inflation has been set at 7%. Although tuition fees were sourced during research, these figures can vary from year to year.
Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and Life Insurer.
