By CAROLYN MAKANA
If you are a parent of a newborn, or even a teenager, you have probably heard the depressing estimate of the cost of University when your child is ready to join, whether it is five years or even 18 years from now. What is a parent to do?
Start now!
The sooner you start saving towards that investment, the better for you. As with any other investment goal, time has to be your best friend.
Have a plan
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What is your plan? First step towards making a plan is to estimate what the total cost of your child’s education is likely to be. Get the average in tuition for a public school now, and add five per cent inflation per year, for however many years from when your child is expected to join university, and that should give you a good estimate for what you should be expecting to fork out at that time. Private schools can be three to four times as much.
Don’t let these numbers scare you into inaction. Some of your child’s education can be paid through bursaries, financial aid, and student loans. It is possible to save the rest if you start early, contributing regularly without fail, and invest wisely.
INVEST
The only thing worse than not saving at all is putting your money where you are not earning any interest.
To amass enough money to finance three to four years of university education, you need to invest aggressively. Don’t just park your money in a fund and leave it.
Review the performance of the funds at least annually and make adjustments as necessary for under performing funds.
When your child is five years from starting higher education, begin to shift your money into growth and income stocks funds to reduce your exposure to market ups and downs while still aiming for high returns.
Two to four years before your child is due to start, cash in enough stocks and bonds to pay the first year, and put it somewhere safe and accessible, like a money market fund.
If you wait just before you need the money, you may be forced to take your money out at a time when the market performance is down, thus losing some of your earnings.
If possible, encourage your child to contribute 10 per cent of a weekly allowance or income from part-time work to the pool.
Give your child a role in making decisions about the investments to learn about and appreciate sound personal- finance habits.
