The cost of sending your children to University
Look at the cost of University today. Course fees? Flights? Rent? Living Costs?
There are three ways to pay for University for your children. One is risky, one is expensive and one makes sense.
Let’s compare 3 families: A, B and C. Each family currently has a young child of 3 years old.
The successful parents went to university overseas and they want the same advantage for their child.
Today, a year at university costs at least $35,000 per year.
That’s $140,000 for a 4-year course. (more information at www.topuniversities.com)
In 15 years time when their children are age 18… inflation will have effect.
At 2.5% inflation the costs go up 45% in 15 years – so they’ll need $195,000 for a 4-year course.
Family A & Family B:
Being laid back, they don’t plan. “Our child’s only 3, we’ve got good jobs and should be earning enough to afford the fees. We’ll worry about it later.”
Family C:
“Perhaps we should plan ahead…” So they start an investment plan today, realising that at 6% per year returns they need to put away $667 per month over the next 15 years.
Flash forward 15 years.
The children have done well at school, and have places at University. How do they pay for it?
Family A: fortunately Family A can afford $4,060 every month for 4 years – they pay out the total of $195,000 from earnings. The downside of this means that they can’t afford to top-up retirement savings, so they can’t retire at 55, but have to work till 60.
Family B: Have some personal issues and their company is going through a difficult period. They can’t afford $4,000 a month. They have a stressful conversation about whether they can afford to send their child to university. After many arguments, they speak to the bank and re-mortgage their house for $195,000.Taking out a 15 year loan against the house for $195,000 costs them $1,540 per month (a total of $277,000). They now can’t stop working until 65 because they’ve got a mortgage to pay off again.
Family C: When they get to 50, their savings plan at $667 per month has averaged 7% annual growth and is worth $212,650.Not only do they have the money readily available for University, but they have $17,000 more. They’ve guaranteed their child’s future and saved a ton of money along the way, thanks to making and sticking to their plan.
Which one of these 3 scenarios do you want to be in?
To Summarise
The cost of University to start in 15 years time is $195,000.00
Family A spend $4,060 per month for 4 years - $195,000 due to lack of planning
Family B spend $1,540 per month for 15 years - $277,000 due to lack of planning and some bad luck
Family C spend $667 per month for 15 years - $120,000 because they planned ahead, and because they took early action, now.