LOUISE FAIRSAVE: Funding university education

For local students, undergraduate education at the University of the West Indies, Cave Hill campus may have appeared free for the most part in the past. However, with Government’s change in policy, the details of the costs involved have been revealed . . . and students are now being asked to bear 20 per cent of the economic costs from the 2014/15 academic year.   
The challenge is how to meet this abrupt imposition of costs for which most students may not have planned and for which funds must now be available. The longer the planning period, the greater will be the possibility of raising the funds.
So, let us consider the ultimate planning period: from the time a child is born. A parent has the responsibility to provide for the fullest development of each child within their financial means which includes providing the child with the best options in education.
An effective and simple approach is to save and invest with the newborn’s future development in mind, from the first day of the child’s life. The earlier the start, the less burdensome the financing plan; a small amount of funds saved regularly over an extended period grows exponentially.
The table below shows how a sizeable sum can be accumulated over the child’s years from birth, Year 0, to his 19th birthday, at the end of Year 18. The first row labelled 50 presents the funds accumulated in each year saving at the rate of $50 per month and assuming interest is earned at three per cent, at the end of each year and compounded as the years follow. Similarly, the row labelled 100 presents the sum accumulated when the savings rate is $100 per month with interest similarly earned.
The fourth row presents the projected growth in basic university fees at an inflation rate of three per cent per year. Even the steady, regular saving of just $50 per month will provide some affordability in pursuing university or other tertiary education.
Further, if this saving is made with an institution like a credit union, a number of options can be covered:  For example, (1) interest may be earned at a slightly higher rate than with a bank; (2) the savings may be used to help support a loan for a larger amounts if needed; (3) borrowers from the credit union are eligible for patronage refund of part of the interest paid to the extent that the credit union meets and exceeds its financial targets; and (4) such a loan carries insurance coverage.
The next article will look at raising funds for tertiary education given shorter and shorter planning periods.
• Louise Fairsave is a personal financial management advisor, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.