How to Save For Your Child’s Education By Age

With the rising cost of education in Kenya, you must put measures in place to educate your child properly. One of the measures you can take as a parent is saving for your child's education. Saving will help you pay school fees in time, avoid unnecessary debts, and ensure your child stays in school and never misses any lesson.

Most parents struggle to create the best saving plan for their child's education. They don’t know when it's best to start and the saving options available for them. One of the best ways to save for your child’s education is to save by their age.

This article dives into how to save for your child's education by age and saving plans available depending on your goals.

Also Read: Money Psychology: Why Is it So Hard to Save Money?

Age Zero to Nine: Long term Saving.

The earlier you start saving, the better. You can start saving immediately when your child is born. By starting early, you can invest in long-term and low-risk investments that can generate income that you will channel into your child’s education. 

When the child is in this age range, they have fewer demands that constrain your budget. This range creates the best window to save for their education - this is only topped by saving even before you have a child. Some of the long-term saving options to look into are:

Create a long-term savings account: Long-term saving accounts (also known as goal-saving accounts) let parents create an account and save a minimum amount monthly over a number of years. They have more attractive interest rates than traditional savings accounts. A parent can create a long-term saving account to save for their child's education.

Also read: Where Do I Keep my savings? The 7 Main Places to Put Your Savings

Create a custodial bank account for your child: Most banks in Kenya will let you open a bank account in your child's name. Banks offer many benefits for custodial accounts, including higher interest rates, zero monthly charges, and zero deposit charges. You can open this account and save for your child’s education in their names.

Invest in rental properties: Investing in rental properties will guarantee you a steady income and high return. You can save the proceeds for your child’s education.

There are many other options with potentially higher returns but with marginal to aggressively higher risks that you can explore here

Age 9 to 15: Medium-term Saving.

Medium-term saving is for parents who are not far out of their goals to save for their child’s education. At this age range, parents tend to feel a lot of financial pressure. They have to save for their child's college education and, at the same time, pay for their education since they are already in school. It is the age when they are joining high school.

Depending on your risk tolerance and your goals (how much you need to save), there are different savings options to consider. Some of these options are:

Also read: Rising Inflation: Where Should You Keep, Invest Your Money?

Treasury Bonds: These are government-secured medium-term investment schemes that pay interest bi-annually until maturity. They are auctioned monthly by The Central Bank of Kenya and are a safe investment for parents looking to save for their child's education without risking their principal.

Education Insurance: Choosing the right education insurance policy can help you save for your child's future education while educating them, as some insurers pay annual bonuses. Consider one with high savings returns and a lower maturity term (4 to 6 years) when buying an education policy. The plan you choose should also come with annual bonus payments you can use to pay for your child’s other needs like books, educational trips, and secondary school fees as you await for the policy to mature just when your child is joining college.

Also read: Money and Me: Insurance, a True Life Saver.

Save in Saccos: Saccos offer great saving alternatives to banks, especially among middle-income parents in Kenya. Choosing the right Sacco can go a long way in helping you save for your child’s education as they offer relatively higher interest rates which can grow significantly if you reinvest the interest. 

If you also choose to buy Sacco shares, you get even higher interest in the form of dividends (the dividend interest rate is typically higher - sometimes double - the interest rate on savings), depending on their financial performance. You will save the profits you make for your child’s education.

Age 15 to 18: Short Term Saving.

Your child is finishing high school and planning post-secondary education at this age range. If you are beginning to save for their post-secondary education at this point, it might be a little of a steep climb given that college costs are the most burdensome to parents financially. 

It would help if you defined your saving goals based on the post-secondary level your child wants to take. These levels are Technical and Vocational Education and Training(TVET), college, or University. 

TVETs are the least expensive and universities the most costly. There are public universities whose fees are daily affordable - oftentimes cheaper than secondary school - but living expenses can raise the costs dramatically. Private universities are typically quite expensive in Kenya. 

The savings options available for this age range are:

Treasury Bills: These are government-secured investment plans that can provide a safe short-term saving plan for a parent saving for their child’s education. Treasury bills offer attractive returns in a short period -  91 to 364 days.

Money Markets Funds: This is another low-risk and short-term investment vehicle you can use to save for your child’s education. Investments take a shorter time to mature, and you can earn attractive interest depending on the market's performance that you will save for your child’s education. You can save in money markets funds through banks and insurance firms.

Fixed Deposit Accounts:  Also referred to as Certificates of Deposit, these involve saving a fixed amount for a specified period at a fixed interest rate. They will typically offer relatively higher interest rates over a short period compared to regular saving accounts, making them suitable for parents looking to save for their child's education in the short term.

Also read: Fun Ways To Teach Your Children About Money

WRAPPING UP

Like it is to save for a new car or a house deposit when saving for your child’s education, there are a couple of things to consider. One is inflation, and the other is the rising cost of education. Don’t save based on today’s tuition fees.

To prevent significant losses and to cushion yourself from inflation, save in high return schemes and diversify your portfolio to maximise the growth of your child’s education fund. Do proper research to find the best saving plan depending on your child’s age. You can always change your approach as your child grows.

Education is vital for your child's future success; you must save for their education. Saving for your child’s education will require a lot of commitment and discipline from you. Create a monthly or annual saving target and make sure you never miss it.

It is never too late to start. Start saving for your child’s education today and secure their future.

Also read: 11 Ways to Save Money Without Driving Yourself Crazy