Family

Saving for your child’s future

He may only be 10, but Matthew Woods is already determined to be a vet when he grows up. His proud mum Karen is sure he’ll make his dream come true.

“He loves animals and he’s a bright boy, who does well at school,” she says.

However, the one thing bothering her about Matthew’s ambition is how she and her husband Rob are going to pay for it. Tertiary education for their children is not something they have given much thought to.

“We’ve always been too busy just trying to pay the mortgage and other bills. Because neither of us comes from academic families we never really thought about university, but I think it’s the parents’ responsibility to plan for it.”

Hearing about the horrendous student loans that many young people end up saddled with is scary, says Karen, who once dug herself out of debt and has vowed nobody in her family will ever end up owing huge sums of money.

Karen has recently set up an account for Matthew’s tertiary education, into which she pays $200 a month.

However, given that there’s only eight years to go until he starts university, and fees will increase in that time, chances are that money will only cover the first year or two.

According to 2010 statistics, it currently costs around $9054 a year to study veterinary science, and the course is five years long.

“Still, I suppose it’s better late than never. In the meantime we will have to look at other ways of coming up with the money.”

So exactly how much does a university education cost?

Costs can vary enormously depending on factors, such as the course your child does, how long it is and whether they can still live at home.

To get a ballpark figure for someone going to university in the next couple of years, look at the study costs along with living costs.

Study costs include course fees, which range from around $4400 a year for a three-year business degree, to $11,500 a year for a six-year medical degree. See sorted.org.nz for more fees. Then add in the course-related costs, such as textbooks and stationery.

Living costs are how much money is needed to house, clothe, feed and transport your child while they’re studying.

If they are able to live at home with you that will greatly reduce this amount, but that’s not always possible.

According to some estimates, a student flatting in Wellington will have living costs of at least $350 a week, including rent, power, phone, food, transport and socialising.

How are you going to afford it?

Before you dash off to the Lotto shop, have a very careful look at your options.

  • Saving up

If you’ve started an account, great. If not, open one now. However, be aware your ability to save may not keep pace with how much it is going to cost once your children start their degrees. Especially if you have expenses such as a mortgage and KiwiSaver, as well as several kids keen on a tertiary education.   So you may want to talk to a financial advisor about other ways of making your money work for you, such as investing in stocks or shares, but make sure you understand the risks.

  • Encouraging your kids to save

Start good financial habits now. once they’re old enough, get them to put some of their earnings from part-time jobs into an education fund.

  • oaking them work

once they’re at uni, a part-time job can help your child cover their living costs. However, make surre they weigh up whether it’s worth it. The money they make may possibly affect their student allowance, and they shouldn’t be working so hard that it affects their studies, or grades.

  • Setting up a tertiary education fund

There are organisations offering investment packages specially tailored to paying for education. Check the small print first – for example, do you forfeit any money if your child decides to forego tertiary education and go straight into the workforce?

  • Student loans & allowances

The current system may have changed by the time your child gets to university, but at the moment, if they meet certain criteria, they can get a student allowance, which doesn’t have to be paid back, as well as the student loan, which does. The allowance helps them out with living costs and may include an accommodation benefit if they don’t live at home. The loan can help finance fees, course-related costs and living costs. Currently New Zealanders owe around $11 billion in student loans.

  • Scholarships

These may help to ease the financial burden if your child receives one.

  • Rob a bank

only joking!

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