With my own daughter having just finished her first year at kindergarten and fees for the second year having just been announced, now seems like a pretty good time to be taking a look at education costs. In particular, I want to focus on university/college costs.
I know that it is quite a jump from kindergarten to university. However, without the aid of a time machine, there isn’t much that I can do about planning for kindergarten costs while with 16 years until university, there is a lot that I can do about that.
The first thing, is to consider the various ways in which these costs can be funded (let’s assume that I would prefer that she didn’t spend the first 10 years after her graduation repaying loans). Having had a think, the main ways that I can see are as follows:
1. Pay the costs from my income. If I don’t do anything about it now, this is the most likely option. However, given that by then I will be in my early 50′s and should be focusing on my own retirement, this would hardly be ideal.
2. I can look at investing money over the next 16 years so that I can use the proceeds to cover the costs. This can be done in two ways. Either by contributing a regular monthly amount into a savings plan or I can invest a lump sum/ series of ad hoc payments.
The benefit of this is that the compound growth on my investment does a lot of the heavy lifting for me.
3. Scholarships, grants, etc. To be honest I am pretty sceptical about this. A lot of universities had their endowments trashed in the credit crisis while at the same time committing large sums of money to grand new extensions. As a result their ability to support has been reduced.
Government support? Hmm, I don’t think I’ll count on that. Most governments have far bigger funding problems to worry about.
At the same time, I am happy to take any money that is going (it’s the Scotsman in me) so I intend to look into this further and will post my findings in a future issue.
In reality, I will probably end up using a mix of all 3. The one thing that will influence to what extent I have to rely on 1 & 3, is how smart I am now.
Ross Naylor is an qualified financial advisor who specializes in providing his clients with impartial, transparent and common sense investment strategies.
He has considerable experience in helping his clients create comprehensive financial plans that provide for the education of their children.