Finances for the future of your family (Shutterstock)
If you’re a parent, then you’ll understand how tough it is to plan the finances for the future of your family. There are tons of things to take into account, including health insurance, life insurances, general insurances, and even normal saving and investments. With so many options available out there, it really is hard to keep track and choose the perfect one to fit your situation in life. One of the most important topics that parents often touch on is the endowment plan for their children’s studies.
The cost of education continues to increase, but schooling is still the best option in terms of securing a bright future for any child. A good education equips them with skills and prepares them to face the challenges of life. However, to ensure your children get the best education comes at a very high price and many sacrifices.
As the saying goes, education is our passport to the future. But how much does a good education cost? Quoted from The Jakarta Post, tuition fees in Indonesia have on average increased by about 10 to 15 percent per year. That’s just the admission fee. For the monthly SPP itself, the increase is the same as general inflation. Currently, the cost of education at the local university level has reached Rp 120-165 million on average. It should come as no surprise that in the next 18 years the cost will be around Rp 1.5 billion to Rp 4 billion. As for overseas universities, depending on where a child enrolls, the cost can be a lot higher. Therefore, preparing education savings for children can be an alternative to help solve cost difficulties.
It is crucial to start planning and saving early. The higher costs of the future have raised concerns among parents on how to set up effective savings plans for their children’s education. You wouldn’t want to be in a situation where your child qualifies for a degree course but there’s not enough money to fund that bright future.
Senior financial adviser and wealth planner Aidil Akbar Madjid recommends that prior to setting up a plan, parents should consider the higher education level they expect their children to reach, such as a diploma, a bachelor’s degree or master’s degree; whether a state or private institution in a local or overseas university of the choice. And more crucial steps are to acquires the information on today’s tuition fees and identify annual increase.
“Knowing the nominal value of a current tuition fee will give you a rough estimate of what to expect to spend on your children’s future education. Therefore, you can identify which investment product to choose now.”
Aidil advised parents to also consider the allocated amount of funds and the length of time to invest, both of which are key factors in meeting their goals.
Right Educational Path for Your Children
Let’s unpack the things that might help you determine the right educational path for your children.
Investment takes time to develop. The cost of education is usually a long-term target that takes more than 5 years to achieve. Take into account the duration of time you need to prepare your children’s education fund. The longer time you have the lighter your load. The duration and amount of costs that should be set aside each month are affected by how old your child is today. Hence why it is ideal for a child’s education planning to begin once you and your partner plan to have a baby. The sooner you start putting money and investing, the better.
But do note that life sure is unpredictable. There are going to be surprises and setbacks that will have unfortunate consequences on the fund. Thus, another benefit of preparing over a long period of time is that you will have the leeway to recover and rebound from adverse events.
Plan your child education level
As mentioned by Aidil Akbar Madjid, it is important to consider the higher education level you are expected from your children to reach. Plan your child’s education, for example, the type of school you want (public, private, or overseas), the type of education according to your child’s interest and talents (art school or medicine, etc.). after that, use the child’s tuition fee calculator you can get on the internet to calculate your estimated future tuition fees.
Calculate the amount of investment you need to do
After getting the target cost of education, you can calculate the amount of investment you need to do to reach the target. The type of investment you make, such as education savings, mutual funds, etc. also affects the amount of investment. According to a financial planner, Freddy Pieloor, for short-term educational purposes (eg. 5 years), he suggested using conventional education insurance because the calculation of the money is guaranteed. As for the longer term, you can choose the education insurance with the choice of investment instruments in stock. Indeed the funds formed will fluctuate, but in the long run, the yields can be better.
And let’s not forget saving: everything starts with saving. Be more efficient in how you save money to close the gap between your actual fund at the end of the investment period and the real education costs you need to cover. There is no guarantee that the future will turn out as we hope.
Consider the need for life insurance
You also have to think about the worst. What will happen if you or your partner as the breadwinner of the family can no longer afford a family, for example, because of illness or death? Prepare protection for your child, so when the worst happens, your child can still live properly and get the best education possible.
Do not hesitate to ask for help
Knowledge of financial planning can be obtained from books, the internet, financial news, or ask your family or friends who have made an investment. Nowadays it is not so strange to use the services of family financial planners. Not that you are not capable to do it, but there are people who are much more understanding about family finances. Therefore, it would not hurt if you also consult a financial planner to create the best education fund plan for your child.
The best path to take when it comes to saving for your child’s education really depends on your personal and family’s needs and lifestyle. So, let’s start now. Learn and unlearn a lot until you discover what works best for you in preparing for your child’s education, so you can support them in soaring high toward their dreams.