Build a goal-based investment plan and don’t get caught in the trap of a child plan fund
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Main takeaways from this blog
- Education is expensive: It doesn’t have to be this way. By investing in your children’s future, you can ensure you have the funds to pay for your children’s education.
- Don’t let fees hurt your kids’ prospects: By paying less, you can compound returns quicker, resulting in more money to pay for your child’s education.
- Diversify your assets: Our automated investment platform gives you the flexibility to do that. We believe it’s the best way to look into an investment for your child’s future.
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You are there every step of the way in your kids’ childhood. You are always trying to imagine what their future will look like and want to make sure they go to the college of their choice.
We all agree that college is a wonderful experience. It’s a chance to build knowledge, explore career options and make friends for life. Here at Sarwa, we believe nobody should miss out on the opportunity to attend college and we want to help you help your kids get there.
The fact is: education is expensive!
Whether it’s nursery, junior school, high school or college, the costs soon rack up. And costs are likely to rise further between now and the time your kids attend college.
That’s why the smart thing to do is to start planning from now, so you can afford it when the time comes.
The challenge facing parents
In many countries, university graduates leave university saddled with debt. In others, it leaves the parents struggling to cover the tuition costs and the daily expenses.
To give you a sense of the problem, the average graduate in the UK carries more than £50,000 of debt from a 3 year degree and faces high interest rates. Many adults continue to pay off their student debts for years after they graduate, preventing them from building for the future and achieving financial independence. Many parents try to help their children financially through college, but for most this means making hard choices and sacrifices.
Nobody wants this outcome for their kids. Education should be about empowerment.
How to overcome it with investing
It doesn’t have to be this way. By investing in your children’s future over the long term, you can ensure you have the funds to pay for your children’s education when the time comes. The numbers might seem insurmountable, but with careful planning, they become much more manageable.
Tuition fees for the London School Of Economics (LSE) for overseas (non-EU) undergraduates in 2019 are around $26,000 for 1 year. With an initial contribution of $5,000, an investment portfolio returning 8% annually over the next 18 years with generate $19,981 in college funds. Not bad, huh?
But when you start contributing funds on a monthly basis, the numbers get really interesting. If you were to add $100 a month, you’d reach $64,950 by the time your child turns 18. Upping this to $150 a month would generate $87,435, covering the $78,000 required to complete a 3 year degree at LSE, with an additional contribution towards living expenses.
The key thing here is that even a small amount invested each month adds up over time, enough to cover education at a top international school.
Start early with Sarwa
Sarwa makes it easy for you to grow your investment for your child’s future with expert, affordable investing. We match you with a personalized portfolio of diversified, low cost funds and use automated rebalancing to keep you on track.
We encourage all parents (and those who are considering starting a family) to begin setting money aside for their kids’ education as early as possible, enabling their investments to compound and grow as much as possible in the years between infancy and college. By starting today, you can grow your investment over the long term, benefiting from the magic of compound interest.
Don’t let fees hurt your kids’ prospects
When investing to pay for your children’s education, you need to consider the impact of fees. Traditional investment managers tend to charge annual fees of around 2.5%. This might not seem that high, but in fact, they can seriously erode the value of your savings, leaving your children with less money to spend on college.
Here at Sarwa, we are very conscious of this challenge and how it disincentivizes investors. That’s why we’re pioneering a completely new approach to managing people’s money, with significantly lower fees and a transparent approach that shows investors exactly what they’re getting for their money.
We charge an annual advisory fee of 0.85% on the balance of your account, billed monthly, and this moves down to as low as 0.5% for larger accounts. The only other fee you pay for is a fund fee of around 0.1%. By paying less, you can compound returns quicker, resulting in more money to pay for your child’s education. We’re talking about thousands of pounds in additional wealth over the lifetime of your portfolio.
Flexibility
As with everything in life, timing is key. As your child gets older and approaches university age, it’s important to have control over your investment so you can modify your risk level and ensure that your child’s money is safe.
Sarwa lets you do that, by selecting one of 3 investment styles – “conservative”, “balanced” or “growth”. So, when your child is young, you might decide to mandate Sarwa to invest more aggressively in order to generate higher returns, and when they are approaching college age, you might decide to change to a more conservative approach that priorities capital preservation.
Our automated investment platform gives you the flexibility to do that. We believe it’s the best way to look into an investment for your child’s future.
Want to know more about investing in your children’s future? join us on Wednesday 20 March 2019 at 6:30 PM, in the FINTECH HIVE at DIFC Office to learn how to start on your kids’ education fund: Workshop on the 4 rules of investing by Sarwa.
Ready to invest in your future?