Is it worth paying school fees annually in advanced?
Most schools have informed parents of the new school fees for 2015, which means that you have only a few weeks left in which to pick the payment option most favourable for your financial circumstances.
Schools generally offer a discounted rate for school fees paid annually in advanced, some offer a discounted rate for quaterly payments, while monthly payments are not discounted.
Niel Fourie, public policy actuary at the Actuarial Society, says schools with the biggest need for capital tend to offer the highest discounts for school fees paid annually in advanced. But often these schools will also require you to pay the lump sum as early as possibe, with some requiring that this amount reflects in their bank account before this year is over. A survey of the 2015 school fees across a number of schools, both public and private, has shown rebates on annual payments of school fees as low as 1.6% and as high as 10%. The most common discount rate appears to be 5%.
The question that many parents who have the means to pay school fees at the beginning of the year is whether the rebate is high enough to warrant a lump sum payment or whether it would be better to either invest the money or keep the money in the mortgage bond access account and pay the fees either quaterly or monthly?
Schools need to realize that people always prefer to have options or choices to choose from. By offering the parents a discount, you will be giving them a choice on whether to pay once off or in monthly instalments. Schools can be creative and ensure that the parents choose the once off payment option out of the two, it's better to allow the parents to think that they made the choice. Most people will prefer to take the monthly instalment option beacuse if they pay once-off, it is a big amount getting paid rather than small amounts. But parents tend to only pay the first or second month and then stop paying until they really have to. This is the most common problem schools are facing, so do not worry, you are not the only school.
The reason for this problem is that parents tend to use the school fee money to pay off other expenses as they come with interest. So parents know that school fees will always be the same amount as there are no interest costs. Eventually, if no action is taken, the parents will just stop paying the fees altogether, this is when the school suffers and in turn the students as there is no money to pay the schools expenses.
Schools need to be abit stricter when it comes to the payments of school fees. Private schools have the advantage and authority to take matters far in terms of suspension of learners for their fees not being paid, but for the non-private schools, it's tough to get the parents to pay on time as there is nothing you can do if parents do not pay. Schools therefore must be prepared to take out the time and the resources to try and collect the school fees.
Facts show that in most schools, between 60-80% of parents do not pay school fees. This just shows that there are only about 20% of parents that have or are paying their school fees while those that are not, their children are still allowed to go to school as well as the children's parents who have paid their school fees. Schools need to try aim at getting payment even if it is monthly. Paying school fees upfront all at once is an option not all parents can choose even if they wanted to, so therefore one will need to work on ways to get monthly payments contiuously which is a big task. Schools would prefer if the parents would pay the school fees once off at the beginning of the year but in reality, it is so much harder to pay the fees upfront especially in this economy. That money is always needed elsewhere and the truth is that most parents use the school fees to pay all the debt first and rather pay monthly fees which also end up not being paid at all. The schools are receiving the short end of the stick as they are not receiving the payments from parents which result in the expenses being added on and not beingpaid on time, this is also when things get cut short in terms of added extracurricular activities and lessons, and it's the students that suffer at the end of the day.
Here are a few tips that schools can perhaps share with the parents about tips on school fees.
If you are not in a position to pay school fees upfront for 2015, here are some tips to help you achieve this for 2016 onwards:
Work out how much you need to save every month to accumulate the lump sum fee for 2016 and then work towards saving this amount either in a money market fund or your bond account starting in January. You will then be in a position to pay school fees upfront for 2016. you then repeat this process and save for the next year. Not only do you benefit from the interest rate earned, but you also benefit from the rebate offered.
Resist the temptation to spend your 13th salary payment and use this money as the basis for saving towards school fees for 2016. this may mean cutting down on christmas presents or other holiday spending this year, but remember that a good educaation is the best gift you can give your children.
If you are paid an annual performance bonus, park this mponey in your access bond and use it to pay the school fees in advanced, especially if your children attend private schools that offer generous rebates of 10%.
Sell the things you no longer need during the year and pay the money into a separate savins or money market account ring-fenced for school fees. You will feel better once you have decluttered your house and you are putting the money to work for a good cause.
We at ECCM can help you collect on all the school fees that are in arrears. we can do all the collectinng processes for the school while you can focus on other important business. Our services comprise of phone calls, letters, tracing, reporting, statements and more. We can take on as many accounts as you need and we will perform the process for receiving the revenues that is owed to you, while you monitor the entire task at any time 24/7. We have all the resources and skills to ensure that the job will get done, so why not let us take on the load while you focus on what's needed.
What is the best option for you? Is collecting arrears school fees a task that you would like to take on yourself, or would you prefer ECCM to do all the work for you?