University funding….are you prepared?

By Finbar Garcia

LUTCF, FSS, MFA

Funding your children’s future education is not easy. It is at times a complex and daunting task if not done correctly. There are people who don’t consider this as part of their financial planning, and may depend on assistance from family, friends, or a possible scholarship.

In preparing for your children’s tertiary education, you will need to be disciplined and follow a planning process. This will allow you to monitor progress, as certain things may change during the period. Let’s look at some simple steps.

Understanding your child’s dream…or maybe your dream – Children will change their career thoughts as they move from class to class. This can have an impact on what you plan to do. A good starting point is to use your career and that of your spouse, as some children may want to follow in their parents’ footsteps. You will need to observe your children during their primary school years, as it could be a great indicator as to their career direction.

Know the university and location they or you desire – This is a big one, as it will take a chunk of your funding if the location is overseas. While it may be difficult to establish the cost for this, you will need to look at the current cost of boarding, transportation, meals, spending allowance and all other costs associated with studying abroad.

You will then need to use an inflation factor, based on the number of years you have before the child enters university, to project the possible future cost. This cost could be in US dollars at the current exchange rate.

Course of study or degree programme – So, you decided on a university, now the programme. Again, this will need some calculations based on the current cost. While most programmes remain at a fixed cost, there are other fees and charges that you will have to consider, along with books and stationery. Cost of university programmes seldom increase every year, so it should be easy to calculate.

Double-edge approach

To fund any education programme, you will need what I refer to as a ‘double-edge approach’. What this means is we will have to design an investment funding programme with a safe and reasonable interest rate return, along with life insurance coverage. While the annual investments made should yield the desired results at the end of a specific period, life insurance is a buffer if you are no longer around to fund the investment. This life cover will automatically pay the sum assured, which equates to the future education funds needed and some extra, to the child or children. This will be held in Trust until they attain the age of 18 years and are ready for university.

Let’s look at a simple scenario. This is based on The University of the West Indies, Faculty of Engineering, 2023 programme fee structure. It does not cater for on-campus living, books and other personal expenses.

This is strictly Tuition Fees per year and other associated fees.

Now based on the current cost of the Engineering programme, we will need to project this in the future. I have added extra funds for books and some other expenses. This is for a live-out student, travelling to The UWI. The next figure is based on a three-year-old child, parents will need funds at age 20, to start at The UWI.

If your desire is to send your children to the USA or Europe, you will need to consider the current exchange rate, monitor, and adjust your investment programme if the exchange rate fluctuates, and all associated costs at the country/university chosen.

“A Dream written down, becomes a Goal. A Goal broken down into steps becomes a Plan. A plan backed by actions becomes a Reality.” – Unknown

Call me for more information on planning your financial future. Send your questions to myfinancialadvisor2020@gmail.com or call 620-1185.

Photo by Felipe Gregate on Unsplash