Really, we are not kidding! According Ligwina Hananto MBA, a financial consultant Quantum Magna Financial, education costs on average increased by about 20% per year. Not to mention the inflation rate in Indonesia. “Inflation for the private schools in Indonesia around 20% per year, and 15% per year for universities in Indonesia,” said Ligwina.
As an illustration, when inflation is estimated at around 6% per year, then in nine years, total inflation to 54%. If the current per semester tuition at public universities Rp 5 million with the entrance fee of about USD 20 million, then the tuition you need to prepare for the year 2020 to around US $ 107.8 million (the calculation of future value). If the tuition fees, books and stationery around Rp 5 million per semester, then add another figure of Rp 77 million for the cost of books for 10 semesters. Not to mention the cost of transportation, meals, and living expenses if the child goes to school in another city or live alone, just think about Rp 3.5 million per month and you get an estimate of living expenses of Rp 210 million. Thus, the total cost to educate the child in 2020 to Rp 400 million. That means you need to set aside Rp 3.7 million per month to 9 years into the future! And, this calculation only applies if the child is accepted at public universities. If you are planning to send her to private university, the figure could be doubled.
Imagine the numbers so fantastic, you might feel pessimistic about how to pay for college the child someday, if only this one time charge your credit card has been piling up on the table. To get a solution, we asked financial planners to help your family. This is what you need to know.
Calculating the cost of education
According to Rina N. Sandy, RFA of Sarosa Consulting Group, there are three main steps that you need to know for sure. “The first step is to determine the choice,” said Rina. The choice here must be specific, you must determine whether your child will eventually schooled to public or private schools, inside or outside the country, with international or national quality standard. “Determining the exact choice of schools for children, aims to find out how much tuition and admission fee at this time.” More Rina. Do not forget the cost of school books, uniforms and living costs, especially if the selected schools are out of town. Once you know the exact choice of schools and the total cost is required, then the second step is to determine the length of time and cost targets in the future. If the child is now 3 years old, then you should start counting when the child entered kindergarten, elementary, junior high, high school and university. Then adjust the funds should be allocated monthly to ensure sufficient amount when the child enters the education level. Rina reminded that when calculating the cost, you do not forget the inflation rate, normally about 10% to 20%.
To calculate the cost, there is a simple formula that you can apply by using:
future value: FV = PV. (1 + r) n
FV or future value is the amount of cost in the future
PV is the current nominal school fees
r is the amount of interest
n is the length of time you need.
If you’re still confused in the count, you can click http://1040tools.com for future value calculator online.
Once you get a nominal estimate, for example, Rp 400 million, then a period of time until the child go to college, you should already be able to prepare a large amount of the funds needed.
To that end, the three-step move to the most important is to determine the placement of funds in accordance with the expectations of investment returns can be received at a later date. There are many options you can do, ranging from education savings, insurance, to investment. Everything is adapted to a period of time and needs. If you dare to bear the risk, you can try to pick investments on the stock market will provide results that are much higher than deposits or savings education.
Despite all the financial advisor would advise you to start saving the cost of education in a separate account for each child as early as possible, do not worry if after doing the calculations, you’re not going to save the amount needed until the child was 18 years old. As an illustration, if you start using the fixed-income funds invest at least Rp 4 million per year with a rate of 10% per year since the year-old child, when a child going to college, you will get the education fund of Rp 182 million. Although nominally still under (for example) the Rp 400 million you need, these funds will still be very helpful than you do not set aside any money at all.
Then, how to get the rest? If the age of the child is under five years old, then you still have plenty of time to set up the fund. Rina suggest you choose a long-term investment instruments such as equity funds. Although these investments have a moderate risk to high risk, but the results of the investment will be considerably higher than in the store or savings deposits. You need to remember if you choose this type of investment is that you save for the long term, not short term.
If you hesitate choose different types of investments, then Rina also encourage you to seek additional work. “There are many kinds of extra work you can do, especially if it becomes part of your hobby,” said Rina. For example, you are good at making cookies and birthday cakes, you can offer it to co-workers or mothers at the playground child. Or, if you like writing, you can become a contributor to the print media.
In addition, there are other options that can make you sigh of relief, major universities will usually provide scholarships to students who excel in school. And it’s not only in the academic field. Pelita Harapan University in Tangerang, for example, to provide scholarships for children who stand out in the field of basketball. Universities also provide scholarships for his students who have high academic value. Even large companies such as Sampoerna Foundation, or Foundation of Caltex Chevron Texaco, and several embassies in Indonesia, open scholarships annually.
When you feel overwhelmed arrange finance with various needs of the child from diapers, milk, baby sitter, until the money base of the small group play, it was hard to imagine how you could still set aside a little extra money from your monthly salary to the cost of education of the child. You need to remember that when the children were young, you have not been at a career and income. Fifteen years from now, chances are that your salary will be increased, and expenses for the monthly needs of children is also on the wane, and you’ll have the rest of the larger monthly salary to help pay for college kids.
Given the tremendous cost to the real perspective
The latter, Rina advise you to be realistic. If this is the family’s financial situation is not sufficient the tertiary, then you are advised to reduce selection. “Sending children to school at major universities in the United States may be the ideals of mostly older people, but if the financial situation is not sufficient, rather than the debt you are stuck, you better send her own country,” explained Blake. You are not advised to borrow money to banks for the cost of college kids. Why? Because it would be very burdensome financially if you have to pay the mortgage plus interest.
One thing that you need to remember when I discovered how high tuition fees: The amount of the tuition fees is projected forecasts of future costs based on what happened today. However, experts believe that the cost of higher education are increasingly craze so most likely they will be re-examined before the child who is now 2 years old and graduated from high school.
Currently there is no sure way to memerkirakan like what picture tuition fifteen years. However, you can build a good start to plan wisely and set aside as much money as you can, and trying not to get too panicky about the high number of child for tuition fees later.
Save More Money Without Charges
Tip # 1 Although Rina N Sandy advise you to invest, he requires you to come first savings. Although only Rp 300 thousand per month, try to always keep it by opening a savings account separate education for each child. The flowers are not large, but the money will be very helpful.
Tip # 2 Margaret Atkins Munro, author of the 529 & Other College Savings Plans for Dummies, suggest that you avoid the cost of tuition groups playing time by putting it into a play group or kindergarten owned by the government. If you enter the child to play the privately run group, the amount of base money could reach $ 4 million to tens of millions. But, if you put it in kindergarten country, the cost is not too large so that the rest can save for future college fund.
Tip # 3 Save coins in a piggy bank. If you only spend money paper and store all your coins in a piggy bank, imperceptibly, you can save quite a lot of money in a year. Encourage your child to save the coins in the bank and you will help him to know the value of money and a simple mathematical calculation.
Tip # 4 Ask for grandma and grandpa to help. Talk honestly to your parents and in-laws about the high cost of tuition. Then, suggest to reduce the number of unusual gifts they give to the child, and instead, ask them to substitute any prize with cash that they can directly transfer to the account of a child’s education. Your child will not be realized if she did not get a doll or a toy as much as last year. But donating money accumulated over 15 years, though only slightly, would be helpful.