How to cope with the rising cost of tuition INQUIRER.net
May 12, 2009
Q: Every year, my wife and I dread the coming of a new school year. We have three kids in school, one each in grade school and high school, and one entering college this year. Tuition fees increase every year but our salaries don’t increase as much. How can we make sure to have enough for tuition fees? Since my youngest daughter is only 8 years old, we still have a long way to go. – Luis
A: When parents of school age children gather together, expect talk to go into the cost of education. It can be quite expensive to send one child to private school, especially if it is an exclusive school.
A year’s tuition and school fees can cost as much as more than P100,000 per child in elite schools. Smaller schools may charge P35,000 per year. And we’re only talking about tuition. There are still other expenses to consider: books, supplies, uniforms, transportation, and even the daily baon. It is not easy to put a child through school, and what more in your case—three children, one of whom is entering college.
But don’t despair. Many parents, no matter how much they earn, have been able to put their children through college. All it takes is hard work—and wise spending and saving.
Here are some tips to follow so you can meet your goal of putting your children through college, based on the brochure “Financial Tips for Parents: Planning for your Children’s Future” published by Citibank Philippines:
Define your goals. Break down what you want to help your child with: a university education, down payment for a car or house, wedding expenses, protection in case of unforeseen events.
Find out how much you need and when. Target a college or university and find out how much a four-year course may cost. Also add the cost of remaining grade school and high school education for your two younger children. Factor in the expected annual tuition fee increase (around 10 percent). You will then get an idea of how much you need to raise each year for tuition until they are all finished with college.
Save and invest early. Don’t just meet this year’s education costs. Start saving for the succeeding years. How can you do this? Start early, and increase your savings rate. If you start saving now for the long term, you may need to pay a lesser amount of money upfront in the future.
“The other advantage of starting early is the benefit of compounding. Compounding means earning interest on the money you have originally invested and on the income you earn from that investment,” the brochure says. Your money will grow more as interest is earned over and over again.
Save, diversify investments and invest regularly. The savings account is not the only way to save money. You may be able to grow your money more via money market placements, time deposits, mutual fund or unit investment trust fund placements (pooled funds), and stocks or bonds.
Study each investment option carefully and invest the money according to your appetite for risk and time horizon. For instance, for your eldest child’s college education, don’t invest your savings in stocks or pooled funds investing in stocks. Choose a more conservative form of investment since the money will be used in the short term. For your youngest child’s education, you have about 10 years more before she goes to college. You can consider the other forms of investment to take advantage of benefits that may be earned over a longer term.
Commit to save money regularly and invest this in higher-earning investments. A good strategy is to set aside money every pay day. Treat saving for your children’s education as a bill you have to pay every month.
Look into financial aid and scholarships available. Your children may be qualified to avail of such; this will greatly ease your financial need.
Check out government or community support programs for further education. Computer classes are one example. If your children can be more efficient in computers, they may be able to perform better in school and have a better chance at bagging that scholarship.
Protect your children’s education fund in case you are not there to maintain it. Look at purchasing insurance endowment fund designating your child as the irrevocable beneficiary to ensure that the proceeds from this fund will be utilized for your children’s schooling.
Teach your children the importance of saving and financial planning by involving them. Get them in on the act. Let them know that the whole family is saving for their educational needs and that is why luxuries may take a back seat. Later, your children may be able to contribute by saving and even working part time. They may be able to earn extra money for baon.
With careful planning, providing for children’s education is possible. Start today.
