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Mistake #2

Leaving it too late

To build up the required R560 000 over 18 years, you would need to invest R930 per month in an investment product that beats consumer inflation (6%) by at least 4% per year. The later you start, the more money you will need to put away every month. If earning additional income is not an option for you, prioritise your child’s education by cutting non-essentials wherever you can. For example, do you really need satellite TV at R665 per month?

Mistake #4

Avoiding high-risk products

If you are investing for a term as long as 18 years, you can afford to take on the volatility (risk) of investing at least some of your savings in equity. The above calculations were made assuming that your investment beats consumer inflation by 4%, which requires equity exposure. But if you invest R697 per month (increasing the amount by consumer inflation every year) in a product that beats consumer inflation by only 1%, you will have a shortfall of more than R130 000 after 18 years. By contrast, if you invested in a fund that beats inflation by 4%, you would have met your goal. Your choice of the right type of portfolio is crucial to your investment success.

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