A Legacy You Can Afford
Our parents told us when we were children that a good education was one of the greatest gifts that they could give. I believe that because I would not be where I am now if not for the education I received —all the skills, knowledge, values and discipline acquired helped mold my intellect as well as build my character to face the real world.
I believe this even more having become a parent myself. Investing in my kids’ education will really them as good citizens and persons. The skills and knowledge are just extras for me—what really matters is that they are inculcated with the right values to live a life of significance.
I am sure that all parents want the best education for their children. In fact, education is not a concern of parents only —there are those who, because of family responsibilities, provide education for siblings and maybe other family members as well. They are the titos, titas, kuyas, ates and even lolos and lolas who do it out of deep love.
But the cost of education today is staggering. Preschools now are even more expensive than college. For example, a year in preschool can cost anywhere between P25,000 to as much as P150,000, depending on where you live. Elementary could cost at least P50,000 to as high as P150,000 while high school could be as much as P80k to P100k. College tuition fees range from P30,000 to as much as P100,000 per semester and these are just for courses that do not require much materials and collaterals. Expenses would be much higher for science-related courses like engineering, architecture or medicine.
Staggering, indeed, and these are just the prices today. How much more in the future when tuition and other fees would have increased due to inflation?
Luckily, you can already start investing for this today. Does it take much? Not really as you have time by your side. You will be leveraging on the long horizon that your money will grow.
If you want to secure your child’s college funding, for instance, you can already set up an investment fund dedicated to that. In terms of cost-efficiency and effectiveness, a pure investment is best — mutual fund, UITF or even direct stock investment — as you get to invest practically all of your money and maximize your earning potential. Of course the choice of instrument would be different the further the goal is into the future. If you need the money for the short-term (1-5 years’ time), it might be better to invest in bonds or money market funds. A balanced fund would be best for a 5- to 10-years horizon — medium-term — while stock or equities investments would be recommended for goals in the long-term (more than 10 years).
Going back: if you have a newborn now and would like to immediately set up a college fund, you can choose an equity UITF, mutual fund or a direct stock investment. The critical thing here is reasonably determining how much is needed by the time your child goes to college. You need to know the current tuition rates of your target school, project how large these would be with inflation in 18 years’ time and develop an investment plan that would allow you to hit that target amount. In my case, I would have to invest P2,000 per month in an investment giving 10 percent per year to have enough to put one child in college. I have three kids, however, so I need to shell out P6,000 per month.
The above plan is true for my target school. Each of us, however, have different dreams and planning for the kids’ education may involve a different time horizon and a different investment approach. The point is, however, that for a very affordable amount you can already build and leave the legacy of a good education for your child.
Education need not be expensive, if you start early and start today.
Rienzie P. Biolena is a registered financial planner of RFP Philippines. He is president and chief financial planner of WealthArki and Consultancy, a financial planning firm. Learn more about personal financial planning at the 68th RFP program this May 2018. To inquire, e-mail email@example.com or text <name><e-mail><RFP> to 0917-9689774.
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