Get a jump on rising educational costs

BY SHAMILLE SCOTT Business reporter

Sunday, December 30, 2012

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INVESTING in your child's education is one of the best investments you can make.

Saving towards doing just that is a given with the rising cost of tuition that is seen at universities every year.

The experts agree to start early, though it's never too late.

"The longer time you save the more you amass," said Lana Forbes, director, sales and services at Scotia Jamaica Life Insurance Company.

But first you should start by researching what it will take to send your child to the school you choose.

It is important to look at what the fees for even nurseries, preparatory or primary schools are and look at costs right through to high school and college, said NCB Insurance Company Limited (NCBIC).

Putting that money aside to finance your child's tertiary education could mean investing, taking out a policy or opening an account at a financial institution.

Some insurance policies carry certain tax-free benefits, which would kick in over the long term, that is, say you built up your savings over five years without touching it, the accumulated amount would be tax-free after the time has passed.

One such example is ScotiaMint.

"Once the cash is untouched, and the premiums are up-to-date, the parent gets a long-term savers' bonus," said Forbes.

Other saving plans for education include a scholarship component. For instance, with an OMNI Educator policy, your child becomes eligible for an education grant.

"Once your child is enrolled in an accredited tertiary institution, NCB Insurance will award a 20 per cent education grant which is calculated and paid directly to the institution for education fees and other related expenses," NCBIC said.

Scotia's Heritage Savings Plan allows the parent to save in US dollars.

When the child is about to start university, the parent can cash in on the amount that was saved up to that point, including interest.

At the end of year one, the student is eligible to receive a scholarship that will help finance the programme for the following years. But the value of the scholarship is dependent on the amount that was saved and the type of degree.

For a child's education, Tania Waldron-Gooden suggests dividend-earning stock, a type of equity investment.

The vice-president of research and special projects at Mayberry Investments said, "With an investment of this type, the parent will always be earning."

For those with a long- term outlook, equity is still ideal. This type has been proven in history to be one of the only asset classes, which gives a high return over a long term, Waldron-Gooden said.

But the type of risk must be examined, for high-risk clients, equity and some types of bonds are ideal.

While the low-risk parent would consider repurchase agreements (repos) or liquid assets that could take the form of savings accounts -- cash.

"The parent has the option of re-balancing the portfolio, which means, if anything changes, the customer can always make a switch of the investment instruments," Waldron-Gooden said.




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