Do you know how much you need to set aside for your child's education and how you can achieve that goal?
To illustrate how much it will cost annually to send your child to a local university, let's have a a quick estimates on the following:
Tuition fees: $6,000
Food: $3,000
Books/stationery: $1,000
Transport: $2,000
Personal expenses: $3,000
Total: $15,000 per year!
So a typical 4-year university education might cost $15,000 x 4 = $60,000 today!
Assumed that the inflation rate for education is 3%, that sum could grow to $108,367 in 20 years' time. Sometimes, the cost of education can rise faster than the inflation rate, which means you will require even more funds.
In order to accumulate $108,367 in 20 years' time, you need to set aside $294 per month now, assuming you invest in an instrument that gives you an annual rate of return of 4%. For 6% rate of return, your monthly saving is $233.
A financial instrument with a higher rate of return can help you to achieve the same goal with a smaller amount of savings every year. But note that any form of investment carries a certain degree of risk. However, the earlier you start saving or investing, the more wealth you can accumulate.
Some of the options you can consider if you want to save for your child's education include saving through a bank deposit account, buying an endowment plan and investing in a long-term investment product. To achieve how best to find a suitable plan for your child’s education programme, it is always advisable to seek guidance from your financial adviser.