How to Plan for Your Children’s Education in the Philippines from K+12 to College

Education is very important to us. We truly believe that it is a ticket to a better life. That's why all of us pursued it to the best of our abilities when we were younger. It is also why our parents pushed us to study as hard as we can. And if you're now a parent yourself, you will want a good education for your kids as well.

Planning for your children's education is a smart thing to do. Schooling is not cheap. In fact, it can be really expensive. So planning for these expenses in the future will help you decide what to do today. 

Some may think they can defer this planning to a later date. They are mistaken. When the future is at stake, the earlier it is the better it will be.

I believe parents have two options here. Either they
  1. Prepare for the full expense or
  2. Prepare for part of the amount and cover the rest when the time comes

Doing nothing is not an option. 

Planning to have all the money is the ideal way. But not everyone can afford it. Putting most of your money to this effort just doesn't make sense. Not when it can take away cash from your basic needs. But if you can afford it, why not?

For most middle-class families, preparation of partial cost is the way to go. 

To do this, here are some basic questions as guide.
  • How much is your projected education expense for your kids?
  • How much can you afford to set aside for your children's education?
  • What's the best way to handle the savings? Should you invest it for growth or just keep it in the bank?
  • If you can only afford to save for part of the cost, what is your plan to cover the rest?

Estimating Future Education Expenses

When doing this, what you want to do is predict how much tuition fees will increase. Tuition fees rise every year. Base from previous hikes, average increase is around 12%. 

Calculating for future value of present cost is straight-forward since we know the rate of increase every year. We just need to know the present tuition fee in the institution of our choice. This will enable us to determine future tuition cost.

Saving Money for Education Fund

Once you have done your calculation, you're likely to find that the amount is too big to save for. (Unless you’re extremely rich) You have to be reasonable about your plan. Make sure you do not overly strain your budget. 

This presumes you have a working budget to begin with. If not, you must start to create one. It will help you in understanding just how much you can afford to save. Not having a budget will leave you guessing - not knowing how your spending will turn out can prove disastrous to your finances.

Investment Options

There are several investment options available for your children's education fund. Ideally, the one you choose should grow your fund as quick as possible. But it should be relatively safe. You don't want to gamble with your children's education at stake. 

Here are some options:
  1. Pre-need plans - these are very unpopular lately. Mainly because of another pre-need company that went under. But it remains an option. If you really want to go for this type of product, choose a good provider. For example, stable life insurance companies offer pre-need plans as well.
  2. Endowment policies - these are primarily life insurance products packaged as education funds. The difference with pre-need is the agreed future benefits. Unlike pre-need plans, endowment maturity benefits are not dependent on future tuition fees. It does not cover the risk of tuition fee increases. Maturity benefit amount is already known from the start. The advantage with this kind of product (and some pre-need products) is that its insurance component insures that the fund will be fully paid for even if the payor dies or becomes disabled. 
  3. Mutual funds - depending on the type of mutual funds, the risks and rewards with this kind of investment varies. 
  4. UITFs - these are very similar to mutual funds. If you want to know more, just read here.
  5. Stocks and/or bonds - doing your own investment will need some amount of studying. This is not easy. You can end up losing your money if don't know what you are getting into.
  6. Time deposits - many think this is their best option. It's safe but the interest rate is too small. Sometimes, the annual earnings from interest are not even enough to cover inflation.
These investments may not be enough to fully cover your children's education expenses. When the time comes, you should be ready to fund the remainder. I believe that there are things that may happen to help you do this, such as:
  • You could get a promotion or a raise which will help you save more
  • You might get bonuses in the future 
  • You may find a better job which will pay more
  • If you're a businessman, your business may just flourish
These are all opportunities in the future. But these are not reasons to do nothing to prepare now. Giving it a start early is a big boost to build your capacity to be ready. Your children deserve nothing less.