IMAC Audit

Financial Planning For Education

Providing the best for children by ensuring that they get quality education up to university level, is certainly the desire of every parent. A good education can be the first step for them to live a quality life and career in the future. Unfortunately, the cost of education is also not cheap, not to mention the inflation of education which can go up to 10-15% per year. Therefore, many parents who have prepared education savings as early as possible, ever since they were just married and do not have children. Not wrong, if you as a parent set aside funds for children’s education savings. But, it turns out there are many who misunderstand by doing too much saving, so ignoring other important things like collecting pension funds.

Perform financial surgery on the funds that you have, starting from the value of investment instruments, savings, deposits, or others. Add all of them together, and project the value with when your child reaches 21 years old. We assume, at the age of 21 years, children have graduated from college and work. The next step to prepare children’s education savings, try to calculate the costs needed. Start by listing how much education costs currently (present value), then calculate its value in the future. Assume your child is now 3 years old, and has graduated from college and is working at the age of 21, taking the highest level of education inflation increase of 15% per year, using the future value formula.

After calculating how much money you have, to the cost of children’s education in the future, of course, you will find out how the shortcomings. To beat the inflation rate, choose investment instruments that can exceed that number with measurable and non-volatile risks. Besides, you can also add fund allocations. However, the portion must also be seen again from the state of your family. Do not let, the portion becomes too large, so you sacrifice the interests of other funds. If you are a couple in their 20s, who are just married, it is certainly not difficult to allocate 30% – 50% of funds for children’s education savings. Therefore, it is highly recommended to prepare children’s education savings with investments as early as possible, so that the preparation is also more mature.

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