Start education funding preparation as early as possible

Food, clothing, shelter and. transportation were likely some of. your basic expenses that followed. that pattern and you likely live in fear. that the gas subsidy will be further. reduced in this year’s budget, fuelling. another wave of increases.

Now, with less than two weeks. left to the start of the school term. you are faced with the prospect that. in a year’s time, you may be losing. part of your child’s tertiary education. funding through changes in the GATE. programme.

If your household income falls. between that middle income. bracket of $10,000 to $30,000. per month, you are going to have. to pay 25 percent of your child’s. tuition expenses.

Anthony Garcia, Education. Minister, has assured this sum is. much smaller than it sounds (see. table) and that government still. assumes 80 percent of the cost of. tertiary education. Garcia has also. said that none of the amendments. made to GATE have been set in stone. and as economic conditions improve,. the programme could become more. inclusive again.

The above, however, only hold. true if certain assumptions are made.

What if a middle income family has. more than one child at university?. That may double or even triple the. monthly amount needed to be put. aside. With competing demands on. the family’s income or unexpected. financial challenges, it is not always. certain parents may be able to. put aside the requisite amounts.

What if your child wants to do a. more expensive degree at a private. institution, or even wants to go. abroad? Remember also, GATE only. covers tuition, what about the other. expenses, food, clothing, rent?. To this, Winston Williams, financial. advisor, added” what if assumptions. about economic turnabout through. an energy price increase are wrong?. “Where this will all end is anybody’s. guess. Will oil prices rebound in a. year? Two years? Five. Some experts. believe it will take seven years before. oil goes back to above $70 a barrel.”. “What should be the concern of. every parent is if low prices should. at last five or six years, could the. government continue to draw down. on the Heritage and Stabilisation. Fund and to borrow money on. the international market? Can we. continue to service these loan and. still support social projects?”. Williams told Business Day that. parents should always assume that. they may have to bear the full cost. of their children’s education. He. also said for middle income families. to prepare for multiple children at. university, both home and abroad,. they need to realise that time, is of. the essence.

“The thing is, it takes a child 18. years to get to the point of university.

So start preparing. Sometimes. you need to start preparing from. conception. Putting aside something. every month is going to make a. difference.”. Recognising the need to start early. is not enough by itself though, said. the financial adviser. Getting proper. advice on how to set up your savings. plan and the investment instruments. you need to grow your child’s tertiary. education money is also critical.

Williams said even though stock. offers higher returns, they are riskier.

“The fact is no one can give you. guarantees with the stock market.”. he said, “Even if they create a blend. of funds and try to diversify. If you. have 20-30 percent of your portfolio. invested this way and something. happens three, or even five years. before your child goes to university,. you can never recover.”. Williams said this is why parents. should consider relatively safer. investments such as money market. instruments or bonds, but this should. be done very early in the child’s life. as the safer the investment, the lower. the rate of interest paid out. The. investment would therefore need. more time to grow.

“It is a matter of restructuring. your priorities and allocating your. resources over a period of time than. trying to do it over one or two years.

You are going to pay for it one way. or the other. Are you going to give. yourself 15 years or will you take. another loan or sell off an asset?. Preparation is key to this.”. Parents may also want to consider. life insurance options.

“Life insurance policies with cash. value options that allow for interest. earning on your investment also. provides for a number of other things.

What if the parent dies before the. child enters university? The only. product that ensures the money. is there if this is the case is life. insurance.”. To decide if one option or the. other, or even a combination of the. two is best, Williams said talking to a. financial planner was the best thing.

He said parents should avoid banks. when looking for financial advice. and be discerning when talking to. insurance salespersons since not all. of them were knowledgeable about. investment.

“An advisor would be able to. structure a plan for you based on your. current financial situation,” he said.

“You may not be able to put aside all. that you need right now, but he or. she should be able to design a graded. programme that allows the parent to. add in a structured or ad hoc manner. as their financial situation changes.”. Working with the advisor, parents. can get a better sense of their. monthly cash flow and their debt. service ratio and how those can be. leveraged to create future funds for. their children’s education.

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