Across Nigeria, children are heading back to school this week, after nearly two months of school break. While this is a good thing, it can also be a source of financial concern for parents. This is especially so for young parents, many of whom were just students a few years ago. Some of these millennials-turned-parents have only begun to pay school fees for the first time in their lives, and they are not finding the expenses funny.
Imagine this scenario
Segun and Ifeoma (aged 29 and 27 respectively), got married in 2013 shortly after their university days. They welcomed a set of twins a year later and have since birthed one more child. Fast forward to 2019, the twins are aged five years old and already in primary school. What this means, is that the young parents must cough out thousands of naira in school fees for the twins every school term.
Due to such factors as a bad economy, lack of high-paying jobs, and the high unemployment rate in Nigeria, these young parents earn average salaries that can barely take care of their needs. For instance, while Segun’s monthly take-home as a medical doctor is N250,000, his wife earns about N150,000 as an Executive Trainee in a bank. Together, they manage their joint monthly income to take care of a range of expenses such as rent, food, clothing, medical bills, extended families’ needs, and most importantly, their children’s school fees.
[READ MORE: These 3 habits are startup killers]
Why school fees are burdensome to millennials-turned parents
The truth is that most public schools in Nigeria offer low-quality services at affordable rates. Therefore, to get quality education for their kids, parents must be willing to spend more. The situation, however, becomes problematic when young parents such as Segun and Ifeoma must squeeze from their earnings to pay these high school fees, bearing in mind that they have a long list of other expenses.
In the early to mid-2000s, Segun attended the Federal Government College at Ijanikin, Lagos. There, the tuition was relatively affordable even as the quality of education was manageable. Now that he is a parent; he knows better than to send his children to public schools, except for a select few anyway. Consequently, he and his wife must bear the cost of sending their kids to private schools where the fees per term are often as high (if not more) than his salary.
How can millennials cope with the high cost of educating their kids?
In a 2018 LinkedIn article which remains relevant till date, financial expert, Damilola Alonge, explained in detail how millennials can best manage the cost of training their children in school. According to him, the answer is simple – young parents should “start building an Education Fund today!” He advocated that every millennial should do this, whether or not they currently have kids.
[READ ALSO: Perennially broke friends have these 6 habits]
Why you need an education fund for your kids
The answer is simple – it is a very smart thing to do. Simply defined, an education fund is money set aside for the purpose of investing in your children’s education. Once again, this is a very wise thing to do because as you may well know, availing a child the right to proper education is one of the best investments any parent can ever make, especially in this part of the world.
It is best to start building an education fund early because the older your children become, the costlier it is to educate them. Starting an education fund for them means that as they grow older, you can easily be able to pay their school fees without becoming overwhelmed.
Let’s get back to Segun and Ifeoma for a second. Their twins’ education will become much more expensive as they graduate to secondary school and then to the university. If the young couple starts now to have an education fund for their children’s future education needs, they’d have a lot of burdens lifted off their shoulders some ten to fifteen years from now.
How the education fund works
Just to be clear, establishing an education fund for your children’s education has nothing to do with opening an account and dumping money in it. Far from it. Instead, it is all about investing. Alonge recommends defining a fixed timeframe between now and when you’d need the money to start paying school fees.
[READ FURTHER: Here’s what Warren Buffet thinks parents should teach their kids about money]
You will also need to factor in the kind of university you’d like your child to attend, as well as how much it currently costs to send a child to such a school. Doing all this will help you know how much of your monthly salary you will need for “investing in a mix of asset classes like equities, fixed income, USD assets, real estate, mutual funds, etc.”
For instance, if Segun and Ifeoma want to start an education fund to take care of their twin’s tertiary education, they can come up with a 12-year investment plan – 12 years representing the timeframe between when the kids will finish with their primary and secondary education before proceeding to the university.
Upon starting the education fund, professional investment/financial planners can then help the couple to monitor the growth of their investments towards the purpose for which they have been made.
