How to Financially Prepare for Your Child’s Education

One of the most important investments parents can make in their children’s lives is education. However, a child’s education is expensive – and it’s only getting pricier. The Bangko Sentral ng Pilipinas (BSP) released their annual consumer price index, inflation rate, and purchasing power of the peso. Statistics have shown that the price of education has increased by 20.3% since 2018.

Aside from the increasing cost of tuition for elementary, high school, and college, the fees you shoulder still don’t include your child’s daily allowances, school supplies, or extracurricular fees. Coupled with annual tuition hikes, the total cost of sending your child to school can snowball into a large number, and it can be overwhelming if you haven’t prepared for it.

The truth of the matter is that planning for your child’s education means looking beyond current costs. You also need to anticipate future expenses.

The Power of Early Financial Planning

When it comes to preparing for your child’s future, the best strategy is to start preparing for their education early. The earlier you start preparing, the lighter the burden becomes because time is on your side. Setting a clear timeline and estimating future education costs help you break down a large financial goal into smaller, achievable steps.

The first step on how to plan for your child’s education is to identify the kind of education you want your child to have - whether you want them to go to a public or private institution, or pursue studies locally or internationally. From here, you can estimate the cost of tuition and create a roadmap on how much you need to save monthly, for how many years, and where to allocate these savings.

When it comes to investments, time is always going to be your best friend. A modest amount of monthly savings today, through the power of compounding interest, can balloon into a substantial amount 20 years from now. 

Adjust Your Lifestyle Practically for More Savings

Saving for your child’s education doesn’t always require a dramatic lifestyle overhaul. Often, it’s about becoming more intentional with your spending and finding opportunities to redirect resources.

Here are some small, practical changes that can add up:

• Limit unnecessary subscriptions - Cancel services you don’t use often or try to stick to just one subscription service at a time.
• Plan meals and groceries – Avoid frequent takeout by prepping your meals at home.
• Use cashback or rewards programs – Maximize your credit card or e-wallet benefits by using these rewards toward everyday expenses.
• Automate savings – Set a portion of your income to go directly into a savings account.

Remember, the goal is to include your child’s education savings plan in your monthly budget and stay consistent.

Explore Investment and Education Savings Options

Traditional savings accounts are a safe option for your child’s education funds, but they may not be able to keep up with inflation. To make sure that your money has a chance of beating inflation, consider exploring these long-term investment options and financial tools.

Here are the most common investment options:

• UITFs or mutual funds - These pooled investments can offer better returns than regular savings accounts.
• Educational insurance plans - These combine protection with savings for future tuition needs.
• Time deposits or fixed-income funds - These offer stable returns at a lower risk profile.
• Stock market investments - If you have a higher risk tolerance and a long-term time horizon, this can yield higher growth.

The key to investing is aligning it with your goals, timeline, and risk profile. Diversifying your investments is also a smart move.

Utilize Government and Private Sector Resources

Several programs and resources are available to help Filipino parents manage education costs:

• Pag-IBIG MP2 Savings - A government-backed program offering higher dividends than traditional savings.
• SSS PESO Fund - Voluntary savings for members looking to grow their contributions for future needs.
• Scholarships and grants - Government agencies and private companies often offer scholarships for primary, secondary, and tertiary education.
• Cooperatives and community savings groups - These often provide low-interest loans or group saving mechanisms with higher interest rates.

Leveraging these instruments can give your child’s education plan an added boost. It can also help lighten the financial burden.

Empower Your Child Through Financial Education

One of the most overlooked yet valuable strategies is involving your child in the journey. Teaching kids essential money lessons like saving, budgeting, and delayed gratification prepares them to handle financial responsibilities in the future.

You can:

• Give them an allowance and teach them how to save.
• Introduce simple concepts like wants vs. needs.
• Encourage them to set savings goals and work toward them.

Preparing for your child’s education is a marathon, not a sprint. The earlier you start, the more options you’ll have and the less financial strain you’ll face in the long run. By planning ahead, making thoughtful lifestyle choices, and exploring the right financial tools, you can sustainably build an education fund for your child.