4 ways to fund your children's education

Better write off option #2 - educ plan. Sorry Mr Tabanag. Pre-need insolvencies aren't just due to deregulated tuition. It's also about inability to change a wasteful, high-commission business model that simply can't survive on today's 4% investment assumptions. Permanent Plans weren't involved in open-ended educ plans, so what else explains them going under? Horrible business model that can't survive in the 21st century!

No more false hope to plan holders, please. Reputable pre-need firms would actually prefer you do business with their life insurance affiliates instead. Iwas sakit ng ulo ika nga. Stick with option 3 - mutual funds, UITF, good-yielding bank products are far more likely to help you reach your goals.

No, not those pre-need companies. See what happened to those who subscribed to CAP? The way they operate, it is almost like the pyramid scheme. Save for your children's education some other way. Another idea is to start looking for all scholarships available for them. Be on the lookout for local ones and even the ones coming from other countries. There are a lot available that are not common public knowledge.

Option 2 will only become viable if the Pre-need bill that recently passed 3rd reading in the lower house becomes enacted in to a law.

yes scrap #2 thats for sure.
better to just start saving any amount from Day one - - when baby comes into this world -- whether savings, UITF, mutual funds, etc.

I think the better question is how in the world did Mr.Tabanag get those figures. While I understand the need for saving should be ingrained in every person, I'm not going to buy those figures without any accompanying logic. If those figures are indeed accurate, what then is the cause for such inflated tuition fee prices.

Because right now, without the logic behind the computation, this seems more like an attempt to scare me more than anything else.

Pre-need education plans are the preferred mode of savings for parents who chose not to go through the rigors of creating and maintaining a personal savings/investment program, maybe because they think investing is something that is too complex for them to handle or maybe because they think that they cannot afford to do so.

Professionally managed funds like mutual funds, unit investment trust and investment-linked insurance products provides an affordable entry point into the world of investing in stocks and bonds, for as low as Php 5,000 for some funds, parents can start building up a foundation for an “education fund”, as they get their feet wet and develop more confidence and resources, they may then want to consider to “go direct” to the market by buying into stocks and bonds on their own.

thank you

the best is to starty a small business and learn from mistakes so you can grow it instead of giving your money to other people who will use it to earn first for themselves before you earn ( or even lose )

yup. uitf's or mutual funds.....good options. what we're doing is invest monthly, auto-debit from savings account, that way, it's always considered top priority/necessity. it may be true that funds aren't performing that well now, but they will definitely bounce back.....in time for university education

I agree with the comment of Monday! The truth is cost of education will continue to increase hence the need for parents to plan now . . . because the money that you will save today will be your money that you can spend for tomorrow!

Just asking may I know the occupation of the author/writer?

Thanks a lot.

optimistic to anticipate the probabilities that these scenario may happen. However not bad though if the minimum value and income for wages and salaries will come along. just consider if these tuition fees are increasing badly then why not the demand for workers compensation as well? the price of goods and even the buy out for elections!

Why not just buy piece of land or a farm lot then make money on it. If your child is going to college. Then sell it later. Don't believe in mutual funds.

@ jay - one drawback: uncertainty over price your land might fetch, minus commissions. you'd want more certainty funding college education. take some risk over 15-year horizon. but play safe 5 years from now.

apparently CAP also gambled heavily on real estate. well look at them now. shatters the myth that land will never lose value. US households and Fil-ams are currently learning this the hard way.

how did Mr Tabanag project P206,000 per sem at 12% inflation? Long-term bonds yield just 5-6% kaya parang tinatakot lang tayo. best to expect 6% inflation and take some investment risk so your gains will equal or exceed tuition inflation.

I think Mr. Tabang is correct in his projections. Yes, the average inflation is 5-7%. However, that's the general inflation for the country across industries, products, etc. What he was looking at is the specific inflation of education.

Here's a way to look at it. How much was the increase in tuition fee last year? The year before that? The average for the past 5 years? You will see from the trend that the average increase of top colleges and universities average 8-15% per year. Thus, you now have the [inflation of EDUCATION] rather than gross national inflation.

There's the logic of the figures.
You can actually try computing it.
FV = PV (1 + i)^n

Where FV = future value (17 years from now)
PV = Present value (30K as he stated)
i = interest or the inflation rate (8-15%)
n = number of period (in this case, 17 years

This is the simple way of getting those figures. There's a simpler way, but this should suffice for now.

Now here's the rub. The average increase in salary/compensation of the average filipino is lower than 10% p.a. That means if the person doesn't start saving now, he'll have a harder time to catch up with the rate of inflation of education.

I'd prefer to save on the higher percentage to augment the risk. Why target only 6%? That could spell trouble.

hi ron. i agree w/ you on the hard reality of tuition costs growing faster than most goods and wages. but on the other hand it really can't grow 6% above fund returns or salaries forever.

If it ever materializes only OFW kids will be left in private schools. Pitiful if RP workers get priced out of the education market one day. Huwag naman sana.

however it turns out in the future, if you invest good enough so your ROI breaks even with tuition inflation, that's good enough.

and heck no education plans please!

@johnnymbarit: Sir, I'm a working journalist po. Not paid by the preneed companies, nor those against them, to write this. :) Thank you for reading Money Smarts.

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