Investing for Kids

If you have young chil­dren, you have prob­a­bly already tried to get a sense of how much it will cost to send them to uni­ver­sity. Unfor­tu­nately, by the time our chil­dren are ready for uni­ver­sity, it is usu­ally about the time we retire. There will be a tus­sle for money– should you pro­vide your kids first or for your own retire­ment? Par­ents have this per­pet­ual set of worries:

1) How are we going to pay for your kids uni­ver­sity education?

2) How to reach kids about money and invest­ment? We want to teach them to be finan­cially respon­si­ble so that we won’t have to sup­port them in our old age.

GOLDEN RULES OF INVESTING FOR KIDS

You and your child can fig­ure ways of get­ting through school when the time comes, whether this be through loans, co-payment or some other means. Wat you want to avoid is find your­self broke after hav­ing taken care of all your children’s edu­ca­tional needs, thereby plac­ing your­self ina posi­tion of depen­dency. So when putting together a strat­egy for your child’s edu­ca­tion con­sider these three steps:

1) Set a goal to save for up to 2 years of uni­ver­sity expenses, and no more.

2) Every month, set aside the min­i­mum needed for edu­ca­tion fund­ing and no more.

3) The rest of your sav­ings should go into your retire­ment account.

This method of invest­ing for kids will make them work for part of it. By teach­ing them finan­cial respon­si­bil­ity, you will be doing them a favour.  Unless you are rich or just want your kids tak­ing respon­si­bil­ity for their own edu­ca­tion, you can use this method. Alter­na­tively, you can adopt cre­ative mea­sures, etc. give them a short term loan to be returned back to your bank account after 2 years of working.

HOW MUCH IS NEEDED

Exactly how much is needed for your child’s edu­ca­tion? Well, if you child is study­ing in a local uni­ver­sity, here is the amount needed, adjusted for infla­tion. You can see that it costs a small for­tune just to ensure your child gets a good ter­tiary edu­ca­tion. Hence, the key to invest­ing for your child is to start early!

Click on the image below to get a larger and clearer image of the table.

Note the fol­low­ing asssumptions.

- The costs are pro­jected to increase at the rate of 5% per annum.

- The fees are cal­cu­lated based on the aver­age fees for the Lab and Non-Lab based courses.

- This graph is  intended for infor­ma­tion pur­poses only and does not con­sti­tute finan­cial advice or recommendation.

- Infor­ma­tion is accu­rate at time of pro­duc­tion on 18 Jan­u­ary 2010.

Note that I have UK, US, Aus­tralia, New Zealand and Canada top ter­tiary insti­tu­tion edu­ca­tion costs adjusted for infla­tion. If you need it , just drop me an email and I will send it to you.

Tags: financial, retirement