Investing For Education

INVESTING for Education is not an easy task for many persons, even though it’s very important. As you know, the cost of education can be very expensive especially when it relates to secondary or tertiary education, both locally or overseas. Therefore, if education is an investment goal you have, you will need to carefully plan ahead for each step, especially if it is being done for your child or children. We know it can be a daunting experience and a some of you may not know how to get started so we have a few important steps to help you get out the starting blocks. Step 1. Prepare a plan

Check the current cost of education among the different levels, nursery, pre-school, primary school, high school, sixth form, college and university. This is important in helping to determine your initial investment amount and the amount to frequently add to your investment to help you reach the targeted amount for this investment goal. As a parent, you will want to ensure that you are able to pay your child’s school fees at each level. As best as possible, we recommend you plan for your child’s education at least 10 years ahead. Step 2. Look at Investment optionsStep 3. Diversify your fundsStep 4 Factor in currency devaluation in your savings Step 5 Taking profit and placing funds in moderate investment Step 6 Look for scholarship opportunities

Inflation is the rate at which prices increase in the market. you will need to ensure that you factor inflation costs in your planning, and budget an increase annually. Its not rational to expect the price of education to remain the same year over year, therefore ensure your budget factors some increase in spend as the child advances in school each academic year,

You will need to check around for options that can assist you with your goal of investing for education. Some institutions have savings or investment plans geared towards long term education with projections for a specified timeframe. We recommend you check these options to see if they meet your financial needs. In addition to this, you will need to remind yourself that the information given is only a projection as rates in the market changes constantly. If the projections do not meet your goals, then go to the next step.

Although you may have invested in an option geared towards education, it is always best to diversify your funds as much as possible to take advantage of opportunities that can take you nearer to your goal. Collective investment schemes such as mutual funds and unit trusts by themselves offers a fair level of diversification based on the composition of these funds and addition plus for these funds is that they are professionally managed to mitigate risks while providing returns based on their defined objectives. You can also look at options that can give you tax-free benefits. At the end of the day, any investment option selected should be in line with your personal goal which must be weighed against your timeline for investing and your risk appetite.

As the cost of living increases continuously, it would be prudent to invest a portion of your funds in a foreign currency as our local Jamaican currency may experience devaluation against benchmark currencies such as US, Canadian dollars. You should consider spreading your risks and potential for growth by investing in hard currency products. And again, a good starting place is Mutual Funds and Unit trust products which by design allows you diversification and currency hedging against devaluation.

With the constant change in market conditions, if you are invested in a high-risk investment and the market is on a high, it would be best to take profit from these investments at intervals and invest in moderate risk products. This would minimize the impact on your investment should there be any downward movements in price.

While saving for education, you should check around to see what scholarship opportunities may exist for funding for your child’s education. This can alleviate the pressure of having to draw down on your investments to make tuition payments, especially when market conditions may not be favourable to doing so.

Whether you are investing for education as a parent or for yourself, it is important that you your investment options carefully.Choose investment options that are aligned with your goals, time horizon and risk appetite in conjunction with the funds you have available for investment. You don’t have to navigate the maze of options alone. Book your appointment to speak with a Scotia Investments Advisor today. Contact us as 888.429 5745 or email us investmentinfo@scotiabank.com.

Karelle McKenzie is a licensed Investment Advisor from Scotia Investments Jamaica Limited.