Saving for university education
The key here is developing the consciousness, discipline and habit of managing your money by separating your income into different accounts based on your short-term, medium-term and long-term goals.
GRADUATION day is the culmination of the aspiration of every parent to see his or her child graduate from the university. However, statistics show that for every 100 Filipino children who enter Grade 1, only 14 eventually graduate from college.
The good news is that, with the adoption and implementation of the K to 12 system of basic education, parents may hope to get their children gain employment after graduation. This is due to the enhanced curriculum that provides mastery of concepts and skills that will develop lifelong learning, middle-level skills development, employment, entrepreneurship and more adequate preparation.
Concomittant with this development, children will be entering the university at 18 years old, instead of the usual 16 years old. This engenders additional two-year educational expense for the senior high-school students in the private-school sector. In essence, those who have prepared education funds originally intended for the first- and second-year college student will now be spending them for the senior high schooler, leaving the senior university years unfunded. Given this, parents will now have more cogent reasons to adjust their family finances to make sure they have adequate resources for the completion of the university education of their children. Here are some suggestions so you can start thinking of concrete steps in providing cash flow for the future educational needs of your children.
Calculate how much tuition and education-related expenses after you have decided which university you will be sending your child. Just to have a bird’s-eye view, here are the estimated cost per unit per term of entering freshman’s undergraduate degree program (random course selection) in selected Metro Manila universities:
per unit per term
Ateneo de Manila University – 3,277
University of Asia and the Pacific – 3,056
De La Salle University – 2,363
Mapua Institute of Technology – 1,545
University of the Philippines – 1,500
Far Eastern University – 1,419
University of Santo Tomas – 1,348
Aside from estimating tuition, we still have to consider laboratory fees, National Service Training Program/Reserve Officers Training Corps fee, miscellaneous fees and other fees. Other school-related fees are books, school supplies, food allowance, dormitory fees, transportation allowance, clothing allowance and others.
Furthermore, we need to prepare cash-flow projections based on the average tuition increases every year. The Commission on Higher Education reported that the average tuition increase per unit for SY 2013-2014 was 8.5 percent nationwide, while the increase in school fees on the average was 7.58 percent nationwide.
Create a spending plan. From your net monthly income (reduced by an allocated percentage for additional taxes) divide your income into separate expense accounts. Classify them as fixed and variable expenses. Consider a monthly allocation for the projected education costs and classify it under the fixed expenses. The allocated amount may be deposited regularly in a separate savings or investment account. Make it a habit to log daily expenses so you can monitor and control them. There are plenty of applications available in your mobile phone so you can record as you spend. In fact, with this daily consciousness, you begin to make decisions on expenses you can forego and on those needs that you have to spend for. This way, you will be able to build an educational fund for your child.
The majority of Filipinos think they do not have enough money to set aside for savings because they could hardly cope with daily household expenses. Aside from looking for additional sources of income, what you can do is examine each of your variable and fixed expenses.
In his book, Finish Rich, David Bach coined a term called “latte factor.” The latte factor is the little unconscious habitual spending we do every day that eventually adds up and can save you a lot of money that you can rechannel to more worthy financial goals, such as an educational fund.
This could be cell-phone airtime credits, cigarettes, candies, Starbucks coffee, etc. You can minimize if not entirely give up on these unnecessary purchases.
The key here is developing the consciousness, discipline and habit of managing your money by separating your income into different accounts based on your short-term, medium-term and long-term goals. Seek the help of a professional financial planner who can assist you in this process and recommend the different financial instruments that will help you achieve your financial objectives as you step into the different life stages.
Arlyn Cheng is a Registered Financial Planner of RFP Philippines. She is a Financial Advisor of a leading insurance company in the Philippines.
Source: http://www.businessmirror.com.ph/saving-for-university-education/
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