Preparing for your Kid’s Education through Mutual Funds

Every parent aims to provide quality education for his/her kids. And of course it takes a lot of effort to produce such a huge amount if you are not going to prepare for it early on. Taking into consideration the current situation in the Philippines, the tuition fee for college students are growing steadily for the past years. Please see link here and here. 

So in order to address the ever inflating cost of education, I will show you how you can fund your child’s college education through the help of Mutual Funds. 

For example you have a child who is turning 1 this year. You decided to make monthly investment of 2000Php (24000Php/year) in an Equity Fund that earns 12% interest per year. How much would you have after 15 years?

So for the next 15 years, parents would save and invest a total of 360,000Php. Before the child’s first year in college the fund would have accumulated a total of 1,000,000Php which accounts to almost 300% gain.

Now you ask me, “Is that possible?”

Let me show you the historical performance of a Mutual Fund Company named PhilEquity Fund Inc. Click here to know more about PhilEquity.

This shows that for the past 10 years the compounded annual growth rate of the fund is at 19.49%. So the computation above is very much possible based from the past performance.

Now here’s a tip

It’s always good to prepare ahead of time. The earlier you prepare the smaller the amount you need to save and invest every month.

Let’s say for example you have a child who is now 5 years old. You would like to have at least 1Million by the time he goes to college. Question, how much should you save and invest in order to do so? Answer, that would be 43500Php per year or 3625Php per month for the next 11 years.

If you delay further, say for example you are going to prepare for your child’s education by the time he is already 10 years old, you will need to save and invest 112,000Php every year or 9345Php per month for the next 6 years.

So you can now see the importance of starting early. The earlier the better.

Here’s another tip

For instance you would like to prepare for your child’s education early on but would only want to save for 5 years. Your target amount is the same 1Million pesos. Simple analysis would tell us that because we would only want to save for 5 years for the college fund, we should increase the amount to be saved and invested per month.

Table above shows that you need to save and invest 46,000Php per year or 3850Php per month in order to do so.

For complete list of Mutual Fund companies, please click here.

Please note:  Past performance is not indicative of future performance. Mutual Fund investing involves risks.

Do you feel miserable when budgeting?

I have read so many blogs about budgeting having the common description as “necessary evil.”

It may seem to be that way but for people who are used to it see it as a need for the family finance to work smoothly. For me, budgeting should not hinder your personal satisfaction. Rather, see it as your guide in achieving your personal goals. If you really want the new gadget then budget your way to it. It also pays to be smart and reasonable when choosing your goals.

Make budgeting fun!

Budgeting can be FUN!

Why not make a dream board and put the pictures of your goal/s in it then make it a habit to track how much you have saved for it? Fun isn’t ist?:)

Budgeting can be EASY!

Budgeting is easy. My personal strategy is “Save first then never mind.” Let me clear this. What I mean to say is, I save first then make the remaining money enough for me until I get my next pay. For example, I want to buy a bike worth 6000Php. I’d like to buy it 3 months from now. So I will be computing how much I should be saving for the next 3 months to realize my dream.

6000 / 3 = 2000

That means I should budget my money such that 2000Php will be saved for my new bike for the next 3 months. Now here comes the adjustment. What if, I am only able to save 1500Php per month? Well, the sound response to this would be to delay my bike until I have come up with the money needed. Another option would be to assess how I spend my money and work it from there. Maybe I should just bring my own lunch instead of buying from the cafeteria. Or I should just commute for a few weeks to save on gas and put that savings on my bike fund. Or maybe I should not drink soda for the mean time and put the saved money to my goal.

Remember, little things add up. It’s just a matter of perspective.

This was I hope I made Budgeting Enjoyable.

Till next time. J

Living in One Income

We have been contemplating on the idea of living in one income and we would like to make some radical changes in our lifestyles to make this happen.

According to the books and blogs I have read, there are three basic things a couple must do if they want to live in one income.

1. Sit down and talk about the idea. – This idea is great for starting couples. Since [it is assumed that] there are only two of you, basic needs are easy to cover with just one income. Determine also whose income it will be. Books tell me that couples have to live with the lower income but that is not an absolute rule.

2. Determine expenses of each. – The couple’s expenses are different from each other. They need to know what is important and what is not through a thorough assessment of each purchase. Give it a month or two to determine the expenses by listing each purchase and analyzing them at the end of the month. It is important that both parties agree on one simple goal - and that is to minimize expenses.

3. Devise a plan and implement it. – This is the most important thing among the three. After the couple has determined what are important and what are not, they can now devise a plan on how to minimize their expense and live in one income. It is also important to update the plan accordingly and counter check or sustain every quarter to make sure that the plan is implemented and the goal is achieved.

So where are we right now?

We are currently at Item number 2 right now. We agreed to make a list on all our expenses so that we can track where our money goes. We also agreed to ask each other’s opinions before a big purchase. It is easier when both of us are on the same page when it comes to money management techniques and investment strategies.

We are just on our first quarter and I hope we can make it through.

~Till then.