The sooner, the better: how to get started on your kid’s college fund

When your kid is still young, it’s understandable if planning for their college education is the farthest thing from your mind. However, the earlier you plan for it, the better the outcome, and the less you’ll have to worry about it later.

Here are some things to remember to help you get started with planning your kid’s college fund:

How much should you set aside?

The first step in planning is understanding the potential costs. College tuition fees in the Philippines have been steadily rising, and this trend is expected to continue. Consider not just tuition fees, but also other expenses such as books, accommodation, and living costs. Inflation plays a big role in future costs, so factor this into your calculations.

Currently, college costs about PHP60,000 to PHP200,000 per semester, depending on the location, school, and degree program. To compute your projection, make sure you factor in inflation (which is about 4% per year on average based on the last five years) and the rate at which schools raise their fees (10% per year would be a safe estimate).

Your computation will likely never be precise but it should be enough for you to set a goal and split that goal into smaller, more achievable annual targets. You can also think of it as just a seed fund that you will grow through instruments like a time deposit account, or long-term investments (more on this later).

The earlier you start saving, the less daunting the task will be

Thanks to the power of compounding, even small amounts saved regularly can grow significantly over time when you put them in the right place. If your kid is still young, consider a monthly savings plan that fits comfortably into your budget.

Grow your money by investing

For long-term goals like college education, simply saving may not be enough. Investing can potentially offer higher returns. UITFs, stocks, or bonds are common investment vehicles. Each comes with its own risks and rewards, so it’s essential to understand these before diving in.

If you’re new to investing, the Earnest app is a great place to start. It offers a curated list of Metrobank UITFs that let you do more with your money, and it provides you with the education you need to maximize your investments.

Educational plans are also a good idea

Educational plans offered by insurance companies like AXA can be a practical way to prepare for your child’s college fund. With plans like MyLifeChoice for Education, you can build an education fund that enables your child to realize their full potential. AXA’s professionally-managed investments will help build a fund for your child to give them the best education. In case something happens to you, your child will get a yearly lump sum to cover his/her tuition until graduation.

Leave room for the unexpected

Life is unpredictable. Your financial situation and goals may change over time. Regularly review your college fund plan to ensure it stays aligned with your current situation and your kid’s educational aspirations. Be ready to make adjustments as needed.

It’s also a great idea to involve them in discussions about college and finances as they grow. This not only helps them understand the value of money and education but also prepares them for their own financial responsibilities in the future.

As for you, you can learn more about creating a healthy financial foundation for your family below:

• Creating a long-term family financial game plan
• Starting them young: how to teach kids financial literacy
• How to use a credit card to improve your household cash flow