4 things to consider before investing in your child's college fund

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Are you agonizing over the options to invest in your child's future education? Here is what you need to know to easily navigate through this financial maze.

Every parent dreams of giving their child the best education — from kindergarten all the way up to college.

If you're like most parents, you would want the same for your child too. However, in today’s world of financial volatility, how do you start saving for your child’s college fees and living costs?

Besides saving for retirement, paying for college is a big financial concern for many Filipino parents.

While you can certainly start saving early, choosing the best way to do this is not an easy task. Most of us are not financially savvy. And getting our heads around the financial jargon related to savings and insurance plans out there is enough to make us run away screaming!src=https://s3 ap southeast 1.amazonaws.com/tap ph/manulife/Manulife Infographic 060618 01 01.jpg 4 things to consider before investing in your childs college fund

Calm down, moms and dads, and breathe easy. We are here to help you. There are several ways to start preparing for your child’s higher education, and here we lay down five tools that can help you get started now:

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1. Opening a Traditional Savings Bank Account — Most of us have bank accounts where we save our money. If you have an ordinary bank account, most probably it is a savings account.

Such bank accounts are the most common way to save money (instead of hiding it under a mattress!). However, you should be mindful of the pros and cons of these accounts.

Pros:

  • Banks pay interest on your deposits (deposited funds accrue interest over time) but interest rates vary from bank to bank.
  • They are easy to open and access.
  • Such accounts are secure — your money is safe and it’s not going anywhere!

Cons:

  • Interest rates tend to be lower than those of term deposits or money market accounts (certificates of deposit and other, higher-interest bank products).
  • You are often subject to transaction limits.
  • Banks may charge fees for operating such accounts.

If you want to save your funds this way — slow and steady — you should go for the best savings account terms and rates after checking with and comparing different banks. However, you should remember that your money won’t grow fast this way. It will be way lower than the yield that you will get from other types of accounts, such as money deposited in accounts for a specific time period.

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2. Trading Stocks and Bonds — Stocks and bonds: the moment we hear these words, we suddenly become wary. Many of us barely understand the mechanics of these financial instruments.

While stocks usually represent the riskier end of the investment spectrum, they also tend to provide superior long-term returns. On the downside, there is also a risk that the investor could lose money in the short term. Bonds, on the other hand, are less risky than stocks. The vast majority of bonds tend to pay back the full amount of principal at maturity, and there is much less risk of loss than there is with stocks.

You can go for a hefty helping of stocks, particularly when the kids are young, to generate growth; however, you should also go for bonds at the same time. This will make sure that your money is intact when you need it.

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3. Taking Out a Bank Loan — This is the last option. But as we all know, any kind of loan (including student loans) can be a heavy burden to bear for whoever takes it — parent or child. 

While a loan (even student loans) can let you pay for college for your child, there is a high price to pay. If your son or daughter starts with a student loan, it means they are  starting adult life with debt. Later in life, after graduation, paying off student loans means putting off other life goals for them. And if they fail to pay off their loans, it will affect their credit score.src=https://s3 ap southeast 1.amazonaws.com/tap ph/manulife/Manulife Infographic 060618 01 05.jpg 4 things to consider before investing in your childs college fund4. Finding the Right Insurance Plan for Your Child’s Education — Since most of the saving options discussed above have a  catch, most savvy parents would look for an insurance plan that does the tedious and detail-oriented work of maximizing your savings.

Again, there are many insurers that offer you insurance plans for your kid’s higher education. The challenge for you is to choose the best plan for your child and decipher the fine-print that insurers will offer you. But how many of you are honestly capable of doing this efficiently?

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A good solution for such parents is GradMaker, a mobile app that makes preparing for your child's college fund easy and convenient.

The first of its kind, it is a digital solution for busy moms and dads who are looking for a seamless, transparent and efficient way to secure their child’s future.

Co-created with parents, this app is packed with awesome features every parent needs and wants.

With GradMaker, you are insured while enjoying the benefits of an investment. The product is a Variable Life Insurance Product, which means you get two benefits in one. You get the relatively high yields of a mutual fund, and you have life insurance at the same time.src=https://s3 ap southeast 1.amazonaws.com/tap ph/manulife/Manulife Infographic 060618 01 06+ new.jpg 4 things to consider before investing in your childs college fund

Moms and dads, there was a time when investing in your kid’s college fund sounded like a complex exercise — to be honest, an absolute chore. Not anymore. It can be as simple and easy as using any other mobile app.

Here's what a mum thinks about the GradMaker.

Start saving early and invest on a regular basis with the easy-to-use GradMaker mobile app. The benefits of an early start cannot be stressed enough as you embark on a long-term goal such as securing your child’s future education.

Download the GradMaker app now and give your child the invaluable gift of higher education, making their dreams come true.

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