Savings for your kids’ education 101

It's never too early to start thinking about your child's future, and with the rising cost of education, it's wise to have a plan in place. But with so many options out there, where do you begin? Fear not, my financially curious friends, we've got you covered! 

In this article, we'll explore tips and best practices for saving for your child's education. So, buckle up and let's dive into the wonderful world of finance!

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Understanding the Cost of Education

First things first, let's get a grasp on the cost of education in New Zealand. It's no secret that tertiary education can be pricey, but by having a clear understanding of the costs, you can better plan for your child's future. Here's a quick breakdown of what you might expect:

1. Primary and secondary education: While public schools in New Zealand are largely government-funded, there may still be some costs involved, such as uniforms, stationery, and school trips.
2. Tertiary education: This is where things can get expensive. Tuition fees, accommodation, textbooks, and living expenses can all add up. It's important to plan and save for these costs over time.

At the time of writing, a Bachelor’s degree can cost between $6,000 and $16,000 (or more!) per year, with subjects like medicine and vet sciences having higher fees. This only includes the cost of the papers, and doesn’t include things like student fees, accommodation, textbooks, and so on.

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Start Saving Early

The early bird catches the worm, as they say, and the same goes for saving for your child's education. The sooner you start, the more time your money has to grow, and the less stressful it will be when the big day arrives. Consider these points:

• Start a dedicated savings account for your child's education as soon as they're born, or even before.
• Make regular contributions, no matter how small. Every little bit counts!
• Take advantage of any government schemes or incentives to help boost your savings or reduce the final costs. The Fees Free can provide a free first year for qualifying students, for example.

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Explore Savings Vehicles

With so many savings options available, it's important to choose the right vehicle to suit your needs. Here are some options to consider:

• High-interest savings accounts: These offer a higher interest rate than regular savings accounts, which can help your savings grow faster over time.
• Term deposits: A term deposit is a fixed-term investment that earns interest at a guaranteed rate. This can be a safe and predictable way to save for your child's education.
• Managed funds: Managed funds pool your money with other investors and are managed by professional fund managers. They can provide exposure to a range of investments, such as shares, bonds, or property.

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Budgeting and Spending Wisely

Every dollar saved is a dollar closer to your child's education fund. Here are some budgeting and spending tips to help you along the way:

• Create a budget: A budget is a great tool for tracking your income and expenses, and it can help you identify areas where you can cut back or save more.
• Shop smart: Look for discounts, sales, and second-hand items when shopping for your child's needs. This includes clothing, toys, and school supplies.
• Teach your child about money: By teaching your child good financial habits from a young age, you'll help them develop a strong understanding of the value of money and the importance of saving. This includes teaching them about debt and interest so if they do need to take out a student loan, they’ll know how to best manage it.

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Invest in Your Child's Future

Investing in your child's education is one of the best things you can do for their future. Here are some additional tips to help set them up for success:

• Encourage scholarships: Scholarships can significantly reduce the cost of tertiary education. Encourage your child to apply for as many scholarships as possible and support them in maintaining good grades and extracurricular activities that may improve their chances of receiving one.
• Consider alternative education paths: Traditional university degrees aren't the only option. Vocational training, apprenticeships, and other types of tertiary education can also lead to rewarding careers, sometimes at a lower cost. Be open to exploring these alternatives with your child.
• Involve your child in the saving process: As your child grows older, involve them in the process of saving for their education. Encourage them to contribute to their savings account from part-time jobs, chores, or birthday money. This will help them understand the value of their education and the importance of saving.
• Review your plan regularly: It's essential to revisit your savings plan regularly to ensure it's still on track to meet your child's educational goals. This may involve adjusting your contributions, and investment strategy, or considering alternative education paths.

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Seek Professional Advice

While this article provides a solid starting point for saving for your child's education, it's always a good idea to seek professional advice tailored to your unique circumstances. A financial advisor can help you develop a customised plan that takes into account your family's financial goals and risk tolerance.

Saving for your child's education is a marathon, not a sprint. By starting early, exploring different savings vehicles, budgeting wisely, and investing in your child's future, you'll be well on your way to helping them achieve their educational dreams.

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