How to save up for your child's college education

by Jon Carlos Rodriguez,

Posted at May 17 2014 02:45 PM | Updated as of May 19 2014 05:26 PM

MANILA, Philippines – Saving up for your child's college education should begin as soon as you are starting to build a family, registered financial planner Jed del Castillo said.

“The longer your time frame is, the cheaper it is to prepare,” he told ANC’s “On The Money.”

According to del Castillo, starting to build a college fund early is ideal because you have to take into that the cost of education increases by about 10 percent every year.

To know the amount needed for a college fund, del Castillo said parents should first calculate for the cost of education when college enrollment comes.

He advised parents to determine costs of enrolling your child in a state university compared to a private school; factor the number of years until your child enters college; and find out the current rate of the school your child wishes to enter and then calculate the future cost by applying the yearly 10 percent tuition fee increase.

Saving for your child’s college tuition should also include other expenses such as rent, food, internet, phone, and books.

Building a college fund also depends on how long you will save for it and investment vehicles you will use.

“If you are a conservative kind of person, and just believe in putting money in time deposit, it would require a larger amount of contributions building that college fund as against putting your money in a manage pooled fund,” he said.

He suggests using aggressive investment tools like the stock market, but when your child is two to three years away from college, he suggests diverting equity funds into a conservative vehicle like bonds or time deposit.

If you didn’t plan early for college tuition, however, do not get desperate.

“Finding ways to grow money quickly will make you susceptible to scams…Just save as much as you can and put it in a conservative investment vehicle,” he said.

Del Castillo also suggests trying to get a scholarship from a private or public school, or applying for Social Security System student loans.

He also advised against using college plans because of low returns.

“I did the math, lugi ka eh, so I would suggest that you talk with a financial planner and discuss in detail what the rate of returns are from these products,” he said.

“In financial planning as a whole, I would really encourage people not only to involve themselves but to involve the whole family and act as one unit for that common goal,” he added.