Financing your child’s education
The resumption of school is right around the corner and as students gear up to go back into the classroom, parents are calculating back-to-school expenses.
This year, back-to-school expenses are bound to be a little bit more costly with price increases causing parents to spend more on basic school items like notebooks, calculators, laptops, bags, and uniforms.
Manager of investment client partnership at JMMB Investments, Kenisha Dwyer Powell, said the first thing to do in this season is stop and do an actual check-in to ascertain what your child’s financial needs are for the remainder of the time they will be in school.
She said having your child reuse items such as school bags or uniforms that are in good condition could also free up funds which can be used to pay tuition or add to their savings/investment portfolio.
“Knowing what you’re likely to need will guide your next steps as you prepare to spend more because, as your child moves on to higher educational attainment, it will cost more,” Dwyer Powell advised.
She disclosed that, in Jamaica, it is quite common to see parents borrowing to finance their child’s education, noting, “Most times when we have the financial planning conversation we realise that they underestimated the costs or were just not equipped with the knowledge and advice to start early. Borrowing has its place and should certainly not be discounted. What we encourage is for parents to start saving and investing early, bearing in mind what their goal is. Once they have this planned out then they will know how much more, if any, they will need to borrow.”
But it’s not a one-size-fits-all scenario, in fact, parents are encouraged to plan differently at each step of their child’s educational progress.
Dwyer Powell stated, “The fundamentals will remain the same, in terms of having the right principle and approach, but may necessitate adjusting the plan as life will happen and situations will change that cause a deviation in the initial plans.”
She said parents will also have to consider the likelihood that their children may reconsider the area of study, or where to study, and that can affect the pockets significantly sometimes.
“We suggest that parents take different approaches that will see them having more saved/invested to help with tertiary studies,” she continued.
Dwyer Powell advised that one way to save more might be to opt out of sending your child to a preparatory school and instead send him/her to primary school. With this, she said there could be significant changes early that can help to compound the savings and earn them more for the more expensive years.
But it won’t happen overnight. The client partnership expert noted that the best way to shop for back to school without breaking the piggy bank is to start early.
“Start saving for the back-to-school event weeks or months before it arrives so you will have more already put aside and just require a smaller amount later. Many households wait for the last minute and when you add all the other bills and needs it can get overwhelming. We even recommend doing a budget at the beginning of the school year in anticipation for the upcoming year and then break it down into the remaining months and save that amount monthly,” she said.
“JMMB has the JMMB graduate and other solutions, such as our Bonus Saver or Unit Trust, that can help with planning ahead of time. The advantage of these solutions is that we offer the financial planning conversation that will uncover the financial needs and put contingency plans/options in place, such as any additional financing that may be necessary to cover shortfalls. This will certainly take out the surprises,” Dwyer Powell continued.
In the same vein, children can also contribute to financing their own education.
“We encourage our children to develop the habit of saving and investing, and the earlier they start, the more disciplined they will become. They can start with our JMMB EzAccess savings account or even with purchasing stocks; these, though, are with the aid of their parents/guardians.”
As they grow, parents should also capitalise on opportunities, such as summer employment, the discipline would have already been cultivated and the next natural thing would be to add to their savings/investments. “With compounding, you will be surprised to see the value over time!”
Aside from those tips, parents are encouraged to have separate goals and matching portfolios to ensure that they do not deplete their retirement savings or other important goals to meet their children’s’ educational needs.
“A perfect example of having other portfolios is the need to have the emergency fund. Life happens and it does not always happen on our terms, so we must be prepared for the eventualities and this emergency fund will do just that. This is crucial as you may be left in the cold (literally) when you need to pull on those funds. Many Jamaicans believe that taking a loan is a death sentence when, in fact, many of us who have achieved our goals needed to do just that! We have to be open and consider the many things that are likely to go against us, such as high inflation, not ideal income, and how our future earnings are impacted by the global economy,” she explained.
With all of this said, she noted, “We have to be open to alternative avenues to finance our children’s education. After all, all parents dream that their children will become more financially stable than them and the only sure way to do that is to give them the best education.”