4 ways to fund your children's education
By Karen Galarpe IT seemed like a scene from a scary movie: P30,000 per sem tuition now will become-- P111,000 per sem in 17 years at 8 percent increase per annum P152,000 per sem in 17 years at 10 percent increase per annum P206,000 per sem in 17 years at 12 percent increase per annum As Registered Financial Planner Alvin Tabanag continued on with his Powerpoint presentation at the recent Money Sense Live! Family Finance 101 seminar, the audience looked at him in disbelief when he said it may take P1 million to P2 million to get a child through college 15 years from now. That may be peanuts for the millionaires out there, but for the rest of us, that is a tall order. A very tall one. Clearly then, we must all save for our children's education, and the earlier we do so, the better. Just how to do that? Tabanag, personal money management coach, author of Kaya Mo Pinoy! 12 Steps to Build Wealth on Any Income, and founder of Pinoy Smart Savers, counts the ways: 1.Pay as you go. It's crossing the bridge when you get there. “A bad strategy since there is no guarantee that the parent will still be gainfully employed or earning income at that time,” said Tabanag. This may also lead to huge debts if that's the case. 2.Get an educational plan. Now educational plans are viewed with utmost suspicion since the industry is having problems. However, Tabanag said the industry is recovering. What really pulled the industry under was the sale of traditional educational plans since the 80s which promised payment of tuition fees in the future no matter what the cost may be. The unanticipated deregulation of tuition fees, the 1997 Asian financial crisis, and the lax enforcement and monitoring of government agencies adversely affected the trust fund earnings of the preneed companies offering traditional educational plans, and the rest, shall we say, is history. “The preneed industry, while troubled right now, will get better,” explained Tabanag, citing the recent SEC order requiring preneed companies to increase their trust fund deposits up to 70 percent. He further said saving for a child's education through a preneed education plan may be attractive to some because it is ideal for those on a tight budget, fits nicely to our “gives” mentality, is easy to understand, and forces us to save. Here are Tabanag's tips for those considering getting an educational plan: a. Buy only from big, reputable companies. b. Read the terms and conditions carefully. c.Compare rates of return. d.Buy the plan you can afford. 3.Save and invest on your own. Another strategy is do-it-yourself: Invest for the purpose of getting higher potential earnings. There is a risk involved, and this strategy requires discipline and regular monitoring. However, there is a wide array of investment choices available which can help you meet your goal. Examples of investment choices are long-term deposit accounts, government securities, stocks, and mutual funds or unit investment trust funds. 4.Use the mixed funding strategy. This simply means employing a combination of any 2 or all approaches. Whatever way you choose, start saving now.
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