How do I plan for my child's education?

Dear Finance Maverick:

I want to send my son to one of the top universities in the future. He is currently 7 years old and as early as now, I want to be able to prepare for it. 

Based on my inquiry, the current tuition of my desired university for him is around PHP 80,000.00 per semester. Now knowing this information, how much do I need to save and invest yearly? Can you help me estimate the cost of his tuition by the time he enters college? 

Answer:

Usually tuition fee increase ranges from low of 8% to as high as 12% per annum.  

For calculation purposes let’s use the middle range which is 10%. Your son is currently 7 years old, based on the K-12 program he will be entering college at age of 19 years old, which is 12 years from now.

Kindly see the table below.

 

Based on the table, we see that you need to prepare for Php 2.33 Million for your son’s college education in the future.

You have to set aside PHP 99, 200.00 pesos per annum for 12 years at investment yield of 10% to achieve your goal. 

Please see the corresponding amount that you have to save and invest in case you get a yield lower than 10%.