We all know that being a parent is tough. It is, in fact, a lifetime commitment. And we’re not just talking about making sure our children are healthy and well fed. As parents, we want our children to be physically, mentally, and, of course, financially capable to take care of themselves before letting them out into the real world. That’s why when it comes to your children’s future, you should invest on their college education as early as now.
Photo courtesy of Daria Shevtsova via Pexels
Investing on your children’s education is the best way to ensure that they have a fighting chance in life and in the future. But as we all know by now, it’s not going to be cheap; especially if you want your children to earn their degrees from the best schools possible. Yes, it’s not going to be a walk in the park, especially since college tuition fees are and will probably be a lot more expensive in the future due to inflation. But it’s certainly not impossible. As with other aspects in life, careful planning is key; and this holds true with saving up for your child’s educational plan.
So how can you set up your children’s education fund? To help you out, here are some useful tips on preparing to finance your children’s future education:
Based on nytimes.com, parenting looks so easy but in reality it isn’t. People can give a lot of good advice regarding it but it’s different if you’re in the situation itself — especially when it comes to saving up.
The worst thing that you can do when it comes to saving up for your child’s future is procrastinating. Not to sound like an alarmist but no, you don’t have all the time in the world to save enough for children’s college fund. As we’ve mentioned earlier, college tuition fees will be significantly more expensive in the future because of inflation. But when you start as early as now, you would have more time to prepare and save for tuition fee adjustments.
Aside from having enough time to prepare and save, setting up a college fund now via an educational insurance plan would mean cheaper premiums and compound interests—which means, more wiggle room for you to manage your current finances and easier ways to save money on a tight budget.
Choose a School You Can Afford
Of course, we would want our children to get the best education—who doesn’t, really? But, let’s be realistic here and really think about it for a second: Can you really afford to send them to these schools? Or can your financial situation (including your savings, lifestyle, job security, etc.) sustain paying for such expensive schools not just at the moment but in the future as well?
These are the questions you should be asking yourself before determining which schools you prefer your children to get their degree from. Note that this is not just about your finances but, about your children’s well being. That’s because, if you choose to send them to an expensive school, then you’re unable to sustain paying for the steep fees, and you end up sending them to a different and much cheaper school.
With a drastic change in environment your children would just suffer the emotional and mental trauma of switching schools. Yes, this is actually backed up by a study so choose a school wisely.
Determine The Amount You Need
Now that you’ve thought about where you would send your kids, the next step would be to know how much you would actually need to send them to these schools. Here are some of the things you should consider in calculating the future cost of your child’s education:
- How much is the current tuition fee of your chosen school?
- How much is the inflation rate of tuition fees every year? Tuition fees go up by a yearly average of 10% according to experts. How much time do you have to save for your children’s education? Or the number of years before your children actually set foot in college
- Multiply the result to four (years to get a bachelor’s degree)
And voila, the result of your calculation will be your goal!
Set Plan to Achieve Amount
So, how will you achieve this goal? Well, unless you already have this amount in your bank account (say, you’ve won the jackpot in a lottery or you’ve inherited it from your well-to-do parents), the only way to achieve your goal is to save, save, save, and to invest, invest, invest. If you don’t have any idea on how to save for your children’s future, we highly suggest you try the 80-20 savings formula. Just click on the link to learn more about it.
And as your children grow older, you’ll be able to let them in to your plans and teach them how to save money for themselves. You’re not only teaching your children the valuable lesson of saving money, you’re actually training them to be more responsible.
Besides saving, you should also seriously consider investing your hard-earned money. Long term investments such as putting your money on stocks could definitely help you achieve your goals faster than just putting your money in banks, especially if you invest long term in high-risk, high-return stocks. The only downside to this option is you always have to keep track on the entire goings on within the stock market. If, however, you’re too busy to constantly check on your investments’ progress, you can always go with Mutual Funds and Unit Investment Trust Funds (UITFs) where professional financial managers would do the work for you.
In the Philippines, parents and soon-to-be parents can save up for their kid’s education with an insurance plan that can also work as an educational plans. This is another sure fire way to achieve your goal is to invest in educational plans. These are specifically designed for people who would want to save for their children’s education.
Keep Track of Your Progress
Lastly, always take time to monitor your progress. This way, you’ll be able to adjust according to cnbc.com where you currently are and it will give you a better chance to achieve your goals.
Responsible parenting is definitely not just about changing nappies and teaching your children how to change clothes on their own. It involves a lot of commitment, time, effort, and of course, money to get them ready for their future. And the best way to do that is save money for their future. Start planning for your kids’ education now and be a gradmaker.