Knowledge might be free but quality education isn’t cheap. This is why making a long or short term plan to save/invest for your child’s education from now, will save you a load of financial pressure in the near future.
Here’s how to go about it:
1. Start Early To Invest For Your Child’s Education
One obvious solution is to begin the saving and investment journey early. This way, not only will you be able to amass a larger sum, but the money will also appreciate all thanks to compound interest.
Besides, with the inflation rate on a non-stop rise, you need compounding to work for you over a longer period; which is why starting to save/invest for your child’s education from today (even before they arrive) is a wise decision.
A delayed start will not only yield a smaller interest but can also jeopardise other financial goals.
If you wait until later to start investing in your child’s education, you might likely fall short of the required amount and struggle.
This is why you see parents dip into their retirement savings to fill the gap, which can be a risky move because just because you have funded your child’s education, doesn’t mean the child will look after you in your old age.
2. How Long Do You Have Before They Enter Secondary School?
Assuming you have six years before your children go into secondary school, it means you have to save or invest it for at least 6 to 7 years.
7 years is about 83 months.
So, let’s say it would cost you about N10m.
So, this means you will divide N10m by 83 months and this will give you about N120,481 and some fractions monthly.
Meaning you have to save N120,482 (round figure) monthly for the next 7 years.
Here’s a more practical example on how to save, invest & grow your money by a Nigerian financial instructor, Ruralexit
3. Research, Make An Estimate Of What This Will Cost You
Let’s say after your research, you learn that you need N3m to cover one child’s education.
Putting this amount in a short span of time may seem daunting. So, why not come up with a savings plan to put away N42,000 monthly for 6 years.
Put those funds in an equity fund that gives let’s say a 10% annual return, and you’ll have enough for one child’s educational needs.
Now, depending on the kind of school you want to send them to and the number of children you want to have, I’ll say “get to it, mama, you/you and your spouse have some millions you need to raise.
4. Deposit The Monthly Amount
Each month, deposit the N42,000 in an interest-yielding savings account or an investment portfolio like stocks, mutual funds, etc. and not in those ‘get 100% in 3 weeks’ kind of investment. I use Crowdywise for my mutual funds investment and they are good.
The great news is that because of compounding interest, you will reach your target in less than 6 years.
You can then channel the extra funds into other school needs.
5. Make Your Contributions Automatic
Piggyvest, Cowrywise, these days, automated savings and investment apps abound.
If you have reservations about these apps, you can talk to your financial institution/account officer to help set up automatic, direct debits from your salary account to your Target Savings Account.
This way you don’t have to put in any extra effort into ensuring you are making the required saving contributions towards your child’s education.
6. Set up a trust fund
A trust is a legal agreement where money is transferred from one person to another according to specific terms.
It is a good way to “manage, control and protect funds” because it gives you the peace of mind of knowing that the money will be used for its intended purpose.
This is another fine alternative for saving/investing for your child’s education.
It is important to set up the trust properly with a written agreement that outlines the terms and conditions in clear terms.
7. Choose your child’s school wisely
In choosing where to send your kids to school, ensure you choose a good school, but also one that fits into your family’s earning income.
When you come across a list of potential schools, evaluate and take advantage of educational loans to fond or invest for your child’s education.
You can also encourage your kid(s) to prepare and apply to schools that offer scholarships to help reduce the financial strain on the family.
8. Pool resources
You can also encourage your parents and other well-to-do family members to make contributions to your kids educational plan, in place of gifts at Christmas, birthdays, and other events.
It helps if they too have kids, meaning they understand the realities of seeing a child through school.
Suggest to grandparents and godparents that the best legacy they can offer your child/ren is a contribution to their education.
Get more resources on finance management for parents and kids here.