Planning for your child’s future education improves their chances of future success
Individuals who plan ahead to ensure they can manage the cost of their children’s future education are putting their offspring in a better position to achieve future success.
This is why Nicholas Neckles, Portfolio Manager with Sagicor Asset Management Inc (SAMI) is encouraging every parent and guardian to put measures in place from as early as possible to save in anticipation of their child or children’s entry into tertiary education institutions, considering the costs of such programmes.
“If we were to look at an individual who is today planning for the tertiary education of their new-born, most of them would find it much easier to save over a period of 18 years, as opposed to trying to find the money when their child reaches that age”, said Neckles. “Using this example, an individual who invests in our mutual fund products with the minimum initial BBD $500 and subsequently continues to add to the investment the minimum BBD $100 per month for 18 years, would accumulate a total of BBD $40,203.70 based on an annual average return of 6%.”
Another example is that of an individual making an initial investment of BBD $5,000, followed by monthly injections of Bds$600 at an average annual return also of 6%. “Over the course of 18 years, they would have amassed BBD $247,095.75. These two examples provide an idea of what’s possible depending on the income level of various individuals.”
To understand how beneficial this level of capital accumulation would be, we simply have to look at tertiary education here in Barbados at the University of the West Indies when Government subsidies were reduced, resulting in costs being incurred by students and their families of approximately BBD $5,000 per semester.
“This change put considerable strain on households and their financial capacity to continue financing their children’s attendance at the institution, along with the first-time enrolment of individuals. If this cost was seen to be prohibitive for some, the option would not even exist for them to look overseas where costs may be significantly higher”, Neckles said.
According to the World Bank’s report on Higher Education, which was last updated in October 2021, tertiary education remains out of reach for many of the world’s poorest and most marginalized, stating that on average in Latin America and the Caribbean, the poorest 50% of the population only represented 25% of tertiary education students in 2013.
The Portfolio Manager said that when we look at the impact of tertiary education relative to individual’s professional success and the growth of economies and societies, it is clear that it is instrumental in fostering growth, reducing poverty and boosting shared prosperity. While the World Bank indicated that “economic returns for tertiary education graduates are the highest in the entire educational system, with an estimated 17% increase in earnings as compared with 10% for primary and 7% for secondary education.”
The report argued that tertiary education benefits not just the individual, but the society as a whole, stating that “tertiary graduates are more environmentally conscious, have healthier habits, and have a higher level of civic participation. Tertiary education prepares individuals not only by providing them with adequate and relevant job skills, but also by preparing them to be active members of their communities and societies.”