Not saving for your children’s future yet? Start now!

July 2016

When any couple starts a family, they are bound to have considered the financial implications of having a baby. These include the potential loss of one parent’s salary, the expense of buying everything a child needs for the next 18 years, and the cost of another name on the medical insurance policy.

However, what some parents fail to think about early on is the cost of putting their child through university – often until it’s too late to save any considerable sum of money. If you haven’t made adequate financial plans, your son or daughter will run the risk of being saddled with an enormous debt upon graduation – or may be forced to abandon their hopes of getting a degree altogether.

Counting the cost of education

Put simply, getting a university education is an extremely pricy business. A four-year degree at the University of Chicago, the most expensive in the world, currently costs more than USD180,000.

Of course, other universities aren’t quite as expensive; the average four-year course in America costs just under USD125,000. Elsewhere in the world, the cost is considerably cheaper. For example, institutions in Hong Kong set their fees at up to HKD 495,000 (approximately USD 64,285) for a four-year course, with UK universities coming in at around GBP 33,000 (around USD 54,780).

Save, save and save again

So, what’s the best way to avoid nasty surprises after your child finishes their secondary education? Three words – save, save, save. Many parents begin an education fund as soon as their child is born. But if that wasn’t possible for you, it’s best to start saving as soon as you can, even if you don’t think you have enough time to cover their university costs entirely. And it may sound obvious, but if you have more than one child, consider that you will need to save even more.

One of the first things to remember is that university course fees will invariably have risen by the time your child starts their degree. Fees have historically increased by around 5 per cent per annum – much faster than inflation.

To give one example, if we take an average four-year course in America today at USD 125,000 after we factor in inflation at 5 per cent per annum, the total cost actually becomes USD 300,827 in 18 years’ time!

You will also want to factor in those extra costs associated with living away from home – rent, food, phone bills, course materials, and other general subsistence needs. However, you may decide that your child will cover these costs themselves by taking on a part-time job while studying.

So what are some of the ways to save?

As an expat, you have access to a wide variety of offshore savings accounts that can offer a good return on your money by the time your child goes to university. However, with interest rates staying low for the foreseeable future, you might also consider the wide variety of stock market investments available to you. The rewards are often greater when you invest in this way, but of course there is a certain level of risk involved so make sure to get professional advice first.

Remember, if you’re starting to save at the very beginning of your child’s life, the prospect of supporting them through university isn’t actually as daunting as it may seem. Eighteen years is a long time to put money aside each month, and you can help the process along by cutting out little luxuries here and there when you can.

If it helps, take an evening to sit down with your partner to ascertain how these monthly luxuries could be trimmed back. However, it’s important to ensure that you’re not inadvertently creating a negative change in your family’s lifestyle, as you’ll be less likely to continue with your saving plan.

It’s also an idea to set up a bank account for your child when they’re young. Family and friends can then deposit cash for them on birthdays and at Christmas rather than buying toys that they will soon get bored of or clothes that they will never wear. All of these little changes can make a huge difference to your savings plan.

None of us can say with any real certainty how much university education will cost by the time your child becomes an undergraduate. But with careful planning over as long a period of time as possible, you can rest assured that you will be able to financially support them through this exciting time in their lives.