By Calvin Mugume
There are significant costs associated with educating your children – whether it’s buying equipment or clothes, or covering the cost of changes to your own working pattern or sending your children to a school.
Education inflation historically runs at about 3% per year above the inflation (CPI) figure in Uganda, so the cost of education is generally increasing at a more rapid pace than our salaries.
The money you spend on your child’s education could be one of your family's biggest expenses
Starting early is one way you can maximize the amount of savings money available to you. Even if your child is a little older it doesn't mean that it's too late to get started. A small amount every month can quickly add up over time. Starting to save early will help your children have a high-quality learning experience.
Work out how much money you need
Estimate how much you'll need based on how old your kids are, whether you want to send them to private or government schools, and whether you're saving for their primary, secondary or tertiary education – or all three.
For example, if you send two children to a private secondary school which costs an average of sh2m a year for each child, by the time they both finish school you will have spent sh24m on only school fees; that's not counting extras such as school uniforms, trips and sporting clinics.
Investments such as saving accounts, fixed deposit accounts can be a way to set money aside for your children's education. Parents should always consider how accessible these funds are, interest rates offered, and the time period.
Different commercial banks in Uganda have various product offerings for parents planning to begin saving for their children. However, saving need not be restricted to a bank account.
Cash in the bank is good for a rainy day but may not be the most effective vehicle for longer-term goals, given that in the current low-interest rate environment the return on cash barely matches inflation over time.
Education funds are special funds to help save for children's education. If you are considering an education fund you should check the following to make sure the fund fits your long term financial plan.
Parents or grandparents can use life insurance to fund their child’s or grandchildren’s post-secondary education by building up and then tapping into the excess cash value within an insurance policy
Finally, you can help your children understand the concept of saving by opening an account of their very own in their name. This will assist in teaching them the value of money and how regularly depositing to an account can grow their savings.
Many parents wonder how much to save for their child's education. They also wonder how soon they should start. The answer is simple. Save Early, Earn More. Even small savings each year will translate into substantial savings later.
Writer is a Senior Financial Risk Analyst at a Commercial Bank