A tertiary-level, educated person is an individual who can make the world his or her oyster. As the cost continues to rise, many parents lay awake at night wondering how they will give their child or children the opportunity of a life time. Tertiary level studies are normally quite costly; with the cost varying depending on the field of study and the particular educational institute.
Furthermore, you may opt to send your child to a university abroad as the field of study may not be offered by our local and regional universities. It becomes even more daunting when parents add tuition fees, accommodation and living costs. Parent's options for tertiary education range from borrowing the funds when your child is ready to go to school, paying for their schooling out of your cash-flow at the time, or begin saving and investing to create an education fund for each child.
The more they learn the more they should earn
Experts suggest that people with a bachelor's degree can earn nearly twice as much than those with only a high school education. Would you like to give your child this gift? Then consider the money that you save for your children as an investment. The savings you make today pays off in an increased earnings potential in the future.
Over time, a little goes a long way
The sooner you start saving for university, the more money you should have when the time comes. If you begin when your child is born and put $300 away a month into an investment earning five per cent annually, you could have about $105,000 by the time your child turns 18. If you start when your child is 10 and you will accumulate just about $35,000. Begin that investment plan now and reap the benefits later of knowing you were able to help your child or children gain a college education.
Once you have determined how much it will cost, it is recommended that the overall cost be broken down into a manageable number by calculating how much you will need to contribute to your investment per year or per month until your child starts school. Depending on the age of your child, you will need to consider the average rate of inflation in order to ensure you meet this financial objective.
Secondly, it is important that you have a diversified portfolio of investments and this is premised on the age-old mantra: don't put all your eggs in one basket. The inclusion of a variety of investments into your portfolio aids in lowering your portfolio's overall risk, as the different asset classes respond differently to the market. Ideally, if one particular asset class is underperforming or incurring losses, another asset class should be posting gains, thus netting off or reducing the size of the losses.
I want to, but I can't save
Too often this is true. If you live paycheque to paycheque, you may not have any money to save toward future school expenses. Try to take a closer look at your expenses. You may be able to "find" money to save just by adjusting some priorities. For example:
�2 Review your online purchases and the money you spend on "entertainment" to find a few more dollars in your pocket.
�2 Try to reduce the number of times you eat out to help "find" an extra $100 a month.
Once you have determined how much it will cost, it is recommended that the overall cost be broken down into a manageable number by calculating how much you will need to contribute to your investment per year or per month until your child starts school. Depending on the age of your child, you will need to consider the average rate of inflation in order to ensure you meet this financial objective.
Secondly, it is important that you have a diversified portfolio of investments and this is premised on the age-old mantra: don't put all your eggs in one basket. You can select from a range of investments to include in your portfolio, including equities and bonds and even real estate.
The inclusion of a variety of investments into your portfolio aids in lowering your portfolio's overall risk, as the different asset classes respond differently to the market. Ideally, if one particular asset class is underperforming or incurring losses, another asset class should be posting gains, thus netting off or reducing the size of the losses.
What do I invest in?
There is also the option of investing in a collective investment vehicle such as mutual funds. Participating in mutual funds provides several advantages, including having a dedicated fund manager who has the necessary knowledge and skill in monitoring the economic environment and market and making the appropriate buy and sell decisions on your behalf.
Investing in more than one mutual fund call allow you to gain an exposure to the various asset classes and investment strategies.
Balanced funds: can provide potential growth in your principal that can assist in helping your funds keep up with inflation.
TT$ income funds: can provide the safety, income and access that you will need while your child pursues their education.
US$ income funds: can provide the safety, income and access that you will need while your child pursues their education abroad and also will remove the hassle of foreign currency conversion.
Thus, to ensure you have the funds available to fund your child's education, you must start early and invest regularly to have any hope of achieving this important financial goal. The UTC has engineered the Children's Investment Starter Plan (CISP) and Student Investment and Protection Plan (SIPP). Both plans cater for an investment strategy tailored to meet your child's education and allow you time to build your investment at a comfortable pace.
The type of investments that you select will primarily be governed by the number of years until your child starts school (time horizon) and your risk tolerance.
Stocks are very volatile and have the highest potential return, but they also have the highest risk. Cash equivalents that includes treasury bills/government treasuries have the lowest risk since they are backed by the government, but they also provide the lowest potential return.
Investors who have a long time horizon and the ability and disposition to tolerate fluctuations in value will be more inclined to invest in stocks. In contrast, investors with a short time frame and low tolerance for wide swings in value will prefer bonds and money market securities.
As such, the younger your child and the higher your risk tolerance, the more time you have to invest and be able to recover from any losses that you may incur. As a result, it may be best to start with high yield high-risk investments when your child is young, and gradually shift your funds to lower-risk investments as college approaches.
A healthy university savings fund may make it possible for your child to attend the school of his or her choice.
Time and consistency are your greatest allies. Begin saving early and invest on a regular basis. Start your college savings plan today and you will give your child one of the greatest gifts they will ever receive.