Many parents are hoping to send their children to university (college) someday and they want to do it without accruing too much debt.
But sending your kid(s) to College is expensive and even though it’s difficult to know exactly what tuition fees will be years from now, just know it’s going to be more expensive by the time your kid(s) are old enough to go, so it is vital to have a plan in place to achieve that goal.
As a parent myself, I believe one of the best things I can do for my kids is to encourage them to go to college as I understand the benefit of a university education not only in terms of personal growth but also in career opportunities, and financial stability.
In addition, a college degree remains a major achievement in the modern economy yet many parents aren’t preparing for it – just below 40 per cent of parents are actively saving for their child’s education according to several studies.
In this article, I will share the tips on how to create a college fund for your kids (how to save for your kid’s college education).
It is impossible to know what kind of school they will attend when your kid is still young, but the important thing is to start saving early, even if it is only a small amount – the sooner you start saving, the more money you will have for your child’s education.
There are so many different choices when it comes to savings plans for education: college fund plans, stock market investment accounts, Government securities (Treasury bills, and Treasury Bonds) and savings accounts.
Unfortunately, in our banking industry, currently, we don’t have any college funds accounts that are specific for savings for your child’s education (this topic is for another day).
Nonetheless, there needs to be a strategy of reaching your savings goal otherwise starting to save early will not help.
With so many different choices out there, it is easy to be overwhelmed but the most important is to look at the pros and cons of each savings plan to ensure the path towards your target is on course.
Ideally, the best time to start saving for your child’s education is when your child is born but some choose to start education accounts for their children before they are born. With compound interest and regular deposits made every month at least, the funds will have an opportunity to grow over a period of time hence helps you to meet other financial obligations without interfering with the funds
Most parents prefer to save for their child’s education with some type of transactional account, such as savings accounts (i.e. Normal saving accounts, Fixed Deposits accounts) because it has been seen as one of the safest and effective ways of savings for education since the risk of losing the saved money is minimal.
The simplest way to start saving is to make it easier for yourself by setting up automatic deposits into an education savings account.
The other option to save for your child’s education is through an investment account; this option gives you total control of your assets as well as lets you invest in a wide array of securities.
You can set up individual or joint account with a brokerage firm and invest in mutual funds or individual stocks of your choice but it is very risky; brokerage accounts usually invest on high-risk investments which can be volatile hence there is a big chance of losing the funds.
In conclusion, we have seen that you don’t have to sacrifice your own abundance to provide a college education for your children.
It is not possible to know the cost of sending your children to college as cost are rising every day but it’s important to estimate how much you will need based on how old your kids are and whether you want to send them to private or government schools.
No matter what plan you choose, starting to save for your children’s education is very important and a big investment you can make towards their future.
Mr Mkwawa is a seasoned banker