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. Of course, this is understandable; when you’ve got a brand new baby in your arms, it’s difficult to imagine them in 18 years’ time, heading off on an exciting journey of academia and self-discovery.
But those 18 years will pass soon enough. And if you haven’t made adequate financial plans, they 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 – and that’s at today’s levels. A four-year degree at the University of Chicago, the most expensive in the world, currently costs more than USD180,000. And that’s just for the course fees alone, not taking into account costs like accommodation, textbooks, food, or spending money.
Of course, other universities aren’t quite as expensive; according to , the average four-year course in America costs just under USD 125,000. 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).
Therefore, undergraduates can choose where to study based on budget. But the fact remains that even the more reasonably-priced courses can still burn a deep hole in your pocket.
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 to ensure that they can support them through their university endeavours. 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 when setting up an education savings plan 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 percent per annum, the total cost actually becomes USD 300,827 in 18 years’ time.
Remember, It’s Not Just the Course Fees…
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. There’s no reason why they shouldn’t contribute to their price of their education at least in part.
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.
Trim on Your Outgoings Where You Can
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 you’re a coffee shop addict, try having a few less lattes each week – it’s amazing how much money you can save just by making tiny changes to your regular routine. That gym you signed up for but never go to? Cancel your membership and put the money into the education fund! And if you’re a smoker, now is the time to quit for good. Not only will you make a vast difference to your health, you’ll also notice that you’re able to save much more money than you originally thought.
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.
Mark Matlaszek has lived in China for over ten years and is the director of BlueStar AMG in Beijing. He has been helping expat families plan for their children’s future education costs for the last decade, as well helping parents plan for their retirement. For more information on the company, visit www.bluestar-amg.com. If you would like a free consultation, contact Matlaszlek directly at firstname.lastname@example.org.
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