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Many fee-paying schools offer parents a discount to pay the year's school fees in advance instead of monthly or quarterly. If you have the cash, you may be wondering if it is worth taking up these offers or whether you would be better off investing the money and withdrawing the fees from it monthly. The answer depends on the discount and the returns you can earn on any investment, but your investment return needs to be a few percentage points higher than the discount rate before the discount becomes unattractive. This is because when you use an investment to fund fees paid out regularly - many schools require fees paid monthly, and often for 10 months rather than 12 - the investment reduces over the year. Old Mutual actuary Pieter du Toit says that to determine whether paying in advance will benefit you, you need to work out the monthly interest on the investment and apply it to the remaining investment each month after the monthly payment has been made. After applying the interest ...

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