• Login
  • Register
Nairametrics
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
Nairametrics
No Result
View All Result
Home Financial Literacy

All you need to know about target saving plans, specifically an education plan

Kalu Aja by Kalu Aja
July 9, 2019
in Financial Literacy, Investment Tips, Personal Finance
All you need to know about target saving plans, specifically an education plan, 7 ways to save money after payday 
Share on FacebookShare on TwitterShare on Linkedin

How can you save to meet a predefined target in the future? For example, if you want to save to hit a future target sum for the education of your child, how can you implement a target Saving Plan? There is a step by step process for this.

Imagine this Scenario

The Makinde family (Makinde and Ijeoma) have a daughter named Hawa aged 5 years old. They plan to send Hawa to University when she is 18. Therefore, they want to begin saving in order to ensure they are able to fund this project.

To save for a child’s education, the steps are as follows:

RelatedStories

Investment One drives financial literacy at Finxperience 2.0  

Investment One drives financial literacy at Finxperience 2.0  

May 29, 2025
Financial Responsibility 101: Factors That Shape How We Handle Money | Money Maketh Man

Financial Responsibility 101: Factors That Shape How We Handle Money | Money Maketh Man

February 17, 2025
  • Determine the investment tenor
  • Determine the current cost of the project, (in this case education)
  • Calculate a rate of growth in the cost of the project is education cost over estimated investment tenor
  • Agree plan to meet the target amount

[READ THIS: Contract staff rise to record high 46,235 across Nigerian Banks]

1. Determine the investment horizon

Hawa is aged 5 and will pay her tuition to the university when she is 18 years. Thus, we have an investment horizon of 13 years to work with (18 yrs. minus 5 years). In other words, the investment tenor will terminate in 13 years.

2. Determine the current cost of the project (education)

This is simple enough. Select target school, determine their cost of tuition, lodging, etc. The Makinde’s want their daughter to attend the University of Nigeria Nsukka. Advised costs as at today are N100,000 a year for accommodation, and N200,000 for tuition plus N50,000 for textbooks. Every year, the total cost would amount toN350,000. Assuming She wants to become an Engineer, that’s 5 years in school; making the total cost N1,750,000.00.

Please note costs are for illustrative purposes. When calculating the cost, be clear on whether costs are set or will go up automatically by a multiplier.

Let’s assume that this pretty girl is Hawa whom we have a target plan to save towards her university education…

[READ THIS: How to calculate deduction for employee compensation scheme]

3. Calculate the rate of growth on the current cost of education

The next thing is to project how much that current cost figure will grow over the next 13 years due to inflation or even administrative price increases. This is the tricky part because we cannot be completely certain about the direction of inflation rates in 13 years. So, we project a series of estimated price hikes due to inflation. Specifically, we build scenarios to forecast how different inflation rates will affect our result.

[READ FURTHER: Just a few weeks after proposing dividends, May & Baker announces capital raise]

A scenario is a necessary risk management process to adopt towards ensuring that we have the optimistic picture (with low inflation) and a pessimistic scenario (with higher inflation)

We can assume, for illustrative purposes, that the cost (inflation) today will rise with the optimistic scenario, ie the cost will grow by 2% every year, using this assumption, the total sum due in 13 years will be N2.2 million.

This N2.2 million becomes the target amount required to pay Hawa’s tuition in the university. It is simply the Future Value of N1.75 million growing at 2% for 13 years. So assuming we agree the rate of school fees will go up by 2% every year for 13 years, we need to have N2.2 million in our education account in 13 years.

4. Agree plan to meet Target amount

If we divide N2.2 million for 13 years, we get N169,230 per year or N14,102 every month. This is what goes into our budget, in the Non-Discretionary part of the budget. Non Discretionary meaning we are committed to saving this amount before we spend on Discretionary expenses like holidays. The key point is that we are funding an amount that has been inflation-adjusted.

The contributions should be invested in an instrument that is safe but beats inflation projected rate of 2%. The first objective here is safety. Even if we buy equity, we must wind down those equity positions as the fund nears the 13 years period.

Open a dedicated account for this. Be consistent, set up a standing order debit arrangement where your debits are swept into a dedicated account, they invested to compound

It’s very important that every year you review your plan, ask the school the current school fees and adjust your plan so that your contributions are well ahead of inflation. What happens if inflation goes up? This means we go back to our scenario and increase the cost of the Future Value Calculation. This will translate to more deductions going from Income to the Non-discretionary Budget

[KEEP READING: Dangote Cement will open a new plant in this East African country soon]

Lots of maths? Yes indeed. But the good news is that there are lots of online Future Value calculators that can do this for you. This means as parents all you focus on is getting the correct variable to key into the scenarios. If you understate inflation, your plan will be skewed off.

It’s also important that before you commerce your plan you speak to your financial adviser or banker and ensure you agree jointly a plan.

Retirement Savings Account

Question: Retirement v Child education

If you had only N100,000 and two choices (either child’s education or retirement contribution), which should you choose? Pick the Retirement. Why?

Your retirement fund is perhaps your most important investment fund. During retirement, the income earned is mostly passive income (income earned without actively being at work). So, take every opportunity to make sure you contribute to a retirement plan and allow your contributions compound an ear and great fund before investing for your child’s education…

Financial Jargon: What is the TSA?

TSA means Treasury Single Account, its an account that collects all of the Government’s accounts under one “manager”. The point of TSA is that the Government can determine how much it has cumulatively in all its accounts and as such, be able to better manage its cashflow. The TSA improves transparency and increases efficiency in the management of public funds

You can also set up your own family TSA, track and funnel all income to one single account and then make payments from that account based off your budget


Follow us for Breaking News and Market Intelligence.
Tags: Financial LiteracyPersonal FinanceTraget Saving
Kalu Aja

Kalu Aja

Kalu is a Certified Financial Education Instructor and astute professional with extensive experience in capital market operations, Treasury, investment, asset management, and occupational pension services.

Related Posts

Investment One drives financial literacy at Finxperience 2.0  
Companies

Investment One drives financial literacy at Finxperience 2.0  

May 29, 2025
Financial Responsibility 101: Factors That Shape How We Handle Money | Money Maketh Man
Digital Media

Financial Responsibility 101: Factors That Shape How We Handle Money | Money Maketh Man

February 17, 2025
Why The Naira Is Gaining Against The Dollar.
Digital Media

Why Does My Money Feel Smaller Everyday? Understanding Nigerian Inflation

November 30, 2024
Investing
Financial Literacy

Why the average Nigerian should consider investing rather than financial trading

March 17, 2024
Personal finance
Financial Literacy

A Guide for Nigerians on Managing Personal Finances in Turbulent Times

August 29, 2023
How inflation affect your personal finance
Economy

How inflation affect your personal finance

August 13, 2023
Next Post
Zenith Bank Plc,

Zenith Bank and First Bank hustle for one customer

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Emple
nlng
first bank








DUNS

Recent News

  • 10 Lagos hospitals delivering advanced surgeries and challenging outbound medical tourism 
  • Geregu Power reports N13 billion Q2 2025 profit, up 61% YoY, beats Q2 forecast 
  • HealthCap Africa launches HealthTech Unicorns Report 2.0 in Lagos, charts bold future for Africa’s health innovation

Follow us on social media:

Recent News

10 Lagos hospitals delivering advanced surgeries and challenging outbound medical tourism 

10 Lagos hospitals delivering advanced surgeries and challenging outbound medical tourism 

July 12, 2025
Geregu Power PLC wins “Most Compliant Listed Company” at 2024 Made of Africa Awards  

Geregu Power reports N13 billion Q2 2025 profit, up 61% YoY, beats Q2 forecast 

July 12, 2025
  • iOS App
  • Android App
  • Contact Us
  • Home
  • Markets
  • Sectors
  • Economy
  • Business News
  • Financial Literacy
  • Disclaimer
  • Ads Disclaimer
  • Copyright Infringement

© 2025 Nairametrics

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Social Media Auto Publish Powered By : XYZScripts.com
No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Login
  • Sign Up

© 2025 Nairametrics