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The Future Cost of Tuition Fees and How You Can Prepare for Your Kids’ Education

Photo credits: http://cceffect.org/

I’m single and I have no kids yet. As a single person I get those questions like “when are you getting married?”, “how many kids do you plan to have in the future?”

Well, I haven’t really decided yet on the answers to these questions, but I definitely become interested in knowing the future costs of sending kids to school.

But instead of relying on winning the lottery or having kids who are intellectually gifted to get yearly scholarships, how about knowing the educational costs and how you can be prepared for it.

How much is the future cost of tuition fees in leading universities?

I’ve prepared some tables on future values of estimated tuition fees of UP, Ateneo, DLSU and UST as of today:

The first column is the number of years from now. The first row refers to the interest rate that an investment may earn. The second row refers to the estimated cost of tuition fees for 1 year of schooling.
UP
8%
10%
12%
Today
         50,000
         50,000
         50,000
1
         54,000
         55,000
         56,000
5
         73,466
         80,526
         88,117
10
      107,946
      129,687
      155,292
15
      158,608
      208,862
      273,678
20
      233,048
      336,375
      482,315
25
      342,424
      541,735
      850,003
30
      503,133
      872,470
   1,497,996

Ateneo
8%
10%
12%
Today
      150,000
      150,000
      150,000
1
      162,000
      165,000
      168,000
5
      220,399
      241,577
      264,351
10
      323,839
      389,061
      465,877
15
      475,825
      626,587
      821,035
20
      699,144
   1,009,125
   1,446,944
25
   1,027,271
   1,625,206
   2,550,010
30
   1,509,399
   2,617,410
   4,493,988
DLSU
8%
10%
12%
Today
      120,000
      120,000
      120,000
1
      129,600
      132,000
      134,400
5
      176,319
      193,261
      211,481
10
      259,071
      311,249
      372,702
15
      380,660
      501,270
      656,828
20
      559,315
      807,300
   1,157,555
25
      821,817
   1,300,165
   2,040,008
30
   1,207,519
   2,093,928
   3,595,191
UST
8%
10%
12%
Today
     70,000
         70,000
         70,000
1
     75,600
         77,000
         78,400
5
   102,853
      112,736
      123,364
10
   151,125
      181,562
      217,409
15
   222,052
      292,407
      383,150
20
   326,267
      470,925
      675,241
25
   479,393
      758,429
   1,190,005
30
   704,386
   1,221,458
   2,097,195

Supposed today the annual tuition fee in UP is Php50,000. And then the yearly increase ranges from 8-12%. You can now get the future values of the tuition fee after 5, 10 up to 30 years. You need to multiply this value by 4, which is the average duration of a formal course in college.

So if you’re planning to send your kid to Ateneo 30 years from now, you’ll be paying about a whopping Php18M for a 4 year course at 12% increase! Wow! And we’re only talking about one kid here. How much more if you have 3 or more? Do you still want to have kids today? LOL. I did have second thoughts. But of course, having a kid and being able to send them to a good school is something that our parents have regarded as their own trophy. It’s like a milestone or an accomplishment in their part.

How much do I need to save up today to prepare my kids’ education?

Supposed you’re 25 years old today (Year 2015) and you wish to get married and have a kid right away at age 32 (Year 2022). That means 18 years after (Year 2040) you’ll be sending your kid to college. You have 25 years to save up for your education goal.

Age
Count
Event
2015
25
1
I’m single!
2016
26
2
2017
27
3
2018
28
4
2019
29
5
2020
30
6
2021
31
7
2022
32
8
Get married!
2023
33
9
2024
34
10
2025
35
11
2026
36
12
2027
37
13
2028
38
14
2029
39
15
2030
40
16
2031
41
17
2032
42
18
2033
43
19
2034
44
20
2035
45
21
2036
46
22
2037
47
23
2038
48
24
2039
49
25
2040
50
26
Send child to school

Now, let’s get some help from our friend MS Excel to compute for the amount we need to save today to secure our kids’ education. Thanks to PMT function, we are able to compute how much we need to work hard for as early as today to prepare for our kids’ educational needs.

Let’s assume that we get the tuition fee with highest increase of 12% after 25 years. In the table below, we summarize the amount you need to save or invest today:

University
Today
Target
10%
15%
20%
UP
         50,000
      850,003
640.63
262.06
100.17
Ateneo
      150,000
   2,550,010
1,921.88
786.18
300.52
DLSU
      120,000
   2,040,008
1,537.50
628.95
240.42
UST
         70,000
   1,190,005
896.88
366.89
140.24

As you can see from the above table, you only need to save even less than a thousand. But this is just good for 1 year worth of college schooling.

Translating to 4 years of study:

University
Today
Target
10%
15%
20%
UP
      200,000
      3,400,013
2,562.50
1,048.24
400.70
Ateneo
      600,000
    10,200,039
7,687.51
3,144.73
1,202.09
DLSU
      480,000
      8,160,031
6,150.00
2,515.79
961.67
UST
      280,000
      4,760,018
3,587.50
1,467.54
560.97

Check out MS Excel’s PMT function if you want to compute and adjust your financial goals accordingly – help me verify the figures!

Where can I get this tuition fee for my kids?

The next question would be – where do I get an investment that can promise me a return of 10, 15 or 20%?

Your parents might have been victimized because the failure of some pre-need companies such as CAP, Pacific Plans, Platinum Plans and The Professional Group (TPG) to provide their commitment to a number of planholders. You might ask – are there still ways to secure your kids’ education? Yes, there are ways such as:

  • Do-It-Yourself Investing. You can invest according to your choice and prepare your own investment basket. Browse through a multitude of blogposts here to get you started. 
  • Educational Plans. The issue with CAP before for example was, it promised to pay for the tuition fees at whatever amount. Since the tuition fees eventually increased, the company lacked the funds to pay timely. Today, most insurance companies will commit to a certain fixed amount of money. This way, insurance companies can project their profits and cashflows accordingly. Also, the insurance industry has been regulated to protect the interest of planholders.

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