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How to Properly Prepare Children's Education Funds

Admin BFI
18 June 2024
How to Properly Prepare Children's Education Funds

Preparing for children's education funds is one of the crucial responsibilities of parents. The rising cost of education makes this preparation essential. Additionally, the increasing cost of education every year, especially for elite and high-quality schools, emphasizes the need to start preparing as soon as possible.


So, when is the right time to prepare for children's education funds? How do you go about preparing these funds? Let's prepare your child's education savings and find out the best way to prepare for your child's education expenses.



1. When Should You Start Preparing for Children's Education Funds?

The simple answer: as early as possible. The earlier you start, the better prepared you will be to handle future education costs. Early preparation gives you more time to accumulate funds and maximize the growth potential of your investments. You can start as soon as your child is born or when they turn six months old. This way, you reduce future financial pressure and enable yourself to provide the best education for your child.


2. Why Should You Prepare for Children's Education Funds as Early as Possible?

2.1 Rising Education Costs

One of the main reasons to start early is the continually rising cost of education. Education inflation can be much higher than general inflation. Without proper preparation, the future costs could be overwhelming. By starting early, you can anticipate these increases and adjust your savings or investments accordingly.


2.2 More Investment Options

Starting early also gives you more investment options. You can choose instruments with higher growth potential, even if they come with greater risks, because you have a longer time horizon to manage market fluctuations. Instruments such as stocks, equity mutual funds, or other long-term investments can yield better returns if given enough time to grow.


2.3 Reducing Financial Stress

By preparing for your child's education funds early, you can reduce future financial stress. When you have adequate funds for your child's education, you won't have to worry about seeking loans or sacrificing other needs to pay for school fees. This provides peace of mind and allows you to focus on other important aspects of life.


3. 8 Ways to Prepare for Children's Education Funds

How to Prepare Children's Education Funds

Image Source: Freepik

3.1 Involve Your Child in the Planning Process

The first way to prepare for children's education funds is to involve your child. Involving them in the planning process can give them an understanding of the importance of education and financial management. Discuss the schools or universities they aspire to attend and the reasons behind those choices. This not only makes them feel valued but also teaches them about responsibility and long-term planning.


3.2 Gather Information About Target Schools

The next step is to gather information about the schools or universities you're targeting. Find out about enrollment fees, annual fees, book costs, and other additional expenses. This information will help you create a more accurate and realistic budget plan.


3.3 Calculate Education Costs and Budget According to Inflation

After understanding the current education costs, the next step is to calculate future costs accounting for inflation. For example, if education inflation is 10% per year, the current cost of IDR 50 million could increase to IDR 129 million in 10 years. Estimate this with your partner to understand how much you need to save.


3.4 Start Saving As Soon As Possible

One of the simplest and most effective ways to prepare for children's education funds is by saving. Start saving as soon as your child is born or even before, if possible. Create a special savings account for education funds and consistently set aside a portion of your monthly income.


Also Read: 12 Ways to Save Quickly and Precisely, Soon-to-be Rich!


3.5 Choose the Right Investment Instruments

Besides saving, choosing the right investment instruments is crucial. Consider the following options:

  1. Deposits: Safe and provide fixed interest, suitable for emergency education funds.
  2. Mutual Funds: Available in various types (money market, fixed income, balanced, and equity) with different potential returns.
  3. Child Education Insurance: Combines life insurance with investment, providing both protection and education fund planning.
  4. Stocks: High potential returns but with greater risk, suitable for long-term.


3.6 Consult a Financial Planner

Consulting with a financial planner can help you design a strategy to achieve your child's education fund goals. They can offer advice on suitable investment instruments based on your risk profile and help monitor your financial plan's progress.


3.7 Evaluate Your Plan Regularly

Regular evaluation is necessary to ensure you stay on track. Review your savings and investments at least once a year, and make adjustments as needed. Changes in economic conditions, inflation, and your child's education needs can impact your initial plan.


3.8 Explore Alternative Education Financing

Besides saving and investing, consider alternative education financing options such as scholarships, student loans, or financial aid programs from the government or private institutions. Always seek and utilize these opportunities to alleviate the education cost burden.


Sobat BFI, that's what you need to know about preparing for children's education funds. Preparing as early as possible is a wise step that can offer many benefits. With thorough planning and proper steps, you can ensure your children receive education without straining the family's finances.


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