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Children's Education Saving- Financing their future
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Education is becoming one of the most critical
requirements for success in the modern world. At the same time the
costs associated with it are increasing at rates significantly above
normal inflation.
Paying for one or more children's education can put a major
financial stress on a family. That is why you should start planning
and saving as soon as possible.
In South Africa most parents start registering there children at
schools just months after they are born. You should start saving at
the same time.
To show you the power of excel spreadsheets we have developed a
calculator to determine how much you need to put aside to fund your
children's education. In this version we have only catered for 2
children. |
To try out our school savings
calculator click on the link below
Saving for children's education
calculator
While it loads in a new page,
read on for the questions you need to answer and what the answers mean.
Inputs
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First you need to enter the
details about your children (we have allowed for 2 here).
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What are there current ages in
years?
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How old are they when they start
school or the education you are saving for?
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How old will they be when the
school/ university or collage ends?
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What is the current cost of
education (simplified assumption that this is the same each year so put it a
bit higher then the actual starting cost)?
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How much do you already have
saved for their education?
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What do you think the inflation
is on school education?
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What will your return on the
education savings be compared to the school fees inflation (if you think
that investments will return less then school inflation then put a negative
percentage in)?
In the yellow blocks you will get
your provisional results. This is the amount that needs to be saved per
month or annually in order to pay off the education. This assumes that you
continue to pay the exact same amount over their education life. In the
beginning this may seem steep, but in latter years it will be less
financially stressful for you.
Not everyone can afford this
however. So in the second tab (look at the top of the page) you can start on
a lower amount and then annually increase the amount you save as your income
increases.
When you click on this page you
will need to add the following information
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Note that all the other
information is pulled through
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You must specify how much you are
willing to increase your savings by each year
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You must specify what you plan to
save in the first year (as a start use the number shown on the previous tab)
In a spreadsheet we would be able
to goal seek this number but on the webpage you need to find it for
yourself.
The aim is to have the 'Minimum
on the Savings Account' be as close to zero as possible. You can achieve
this by changing the total savings per year or the Escalation on savings per
year.
Once you have this at a level you
are happy with, compare the results shown in the second yellow block between
opting for equal installments over the life of children's education or
gradually increasing how much you save for schooling and tertiary education.
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