How to avoid borrowing to pay school fees
It’s that time of the month again and Remy looks visibly worried. He is increasingly running out of options and was tired of hiding from some people. Ironically he is about to add more people at to that dreaded list of lenders.
This time, his Children’s school fees was about N2million per term and he had just N50, 000 left from his prior month’s salary. Now that he had run out of options on who to run to for more cash, he was now contemplating getting a bank loan to finance his children’s school fees.
Pulling them out of that school and telling the kids he can’t afford it was also not an option. He had to keep up that lifestyle as he thought his status in society was very important in addition to his genuine quest to have his kids obtain the best education they possibly can get. If borrowing is what it takes then borrowing he must embark on.
Should this be the right approach? Must we continue to live from hand to mouth despite the harsh economic environment we find ourselves in? Before you decide to live like Remy, why not consider these options.
I have always reiterated the importance of having a family budget prepared on a Monthly basis. Budgets if nothing, gives you an insight into your household income and the likely expenses that will match it. Every single naira that you earn must have a mission. Without budgets it is easy to think that you have the money only to find out later that you have to borrow to augment.
Cut your coat to your cloth
If your Children school fees per term is more than 50% of your monthly take home pay, then you have basically set the stage for hardship and borrowing. For example, a family that earns a combined N500, 000 per month will need to save N75, 000 every month to pay for a N225,000 per term school fees per term. Anything above this is a recipe for incessant borrowing.
Not for everyone
Nearly every average working class family will like to have their children attend the best schools in the world. Harvard or Princeton for example, cost over $30,000 per annum for tuition taking it out of the reach of most families. This is why there are other options for students who cannot afford to pay for an Ivy League school. Luckily there is no written rule that says students who end up not going to an Ivy League school cannot perform better in their careers. This is so with some of the local schools we have in Nigeria. Rather than whine about not being able to afford a better looking school for your kids efforts should be made at putting them in the next best school that you can afford
Work even harder
Big dreams hardly die so if you still want your ward to go to that big school then you have to work really hard for it. Put in more efforts at your job making sure that it never goes unnoticed. Soon enough, you will be promoted and paid a higher salary. If that doesn’t happen, then seek employment elsewhere that can pay you better.
Seek alternative income
Why not explore other means of augmenting your salary? If you are good at trading then you can have a buy and sell business by the side, which can help fund the school of your dreams for your children. Besides, alternative income helps increase the amount you can throw on school fees when you earn more.
This is perhaps another very good way of ensuring your child goes to the best school they can go to. You can take out an insurance policy that can help you save towards your children’s school fees. For example, they might be in a primary school that you do not really like but have no choice because you can’t afford higher. But then, you believe you can at least ensure they attend a quality secondary school. By buying insurance you get the dual comfort of saving towards that dream and ensuring that your dream still comes through if you are incapacitated or die.
Invest towards the future
Just like above, you can also invest your money in a high yielding mutual fund, bond or many of the quality products in the money and capital markets. For example, buying an FGN Bond that pays 15% per annum in yield and reinvest the interest for about 10 years can turn out to be an extraordinary pay out upon maturity. By leveraging on the power of compounding interest, you can grow that money exponentially helping you pay for a quality school even if its tertiary.
Home schooling is not yet popular in Nigeria but some parents are actually trying this out. Most working class people are professionals in their own right and by spending extra time at home with their kids they can teach them even more than teachers for whom they pay all those salaries.
Another shortcut to a quality school is having an extraordinary intelligent child. That way, the child basically uses her brilliance to attend the best school she can get without paying tuition. Whilst this is rare, you should encourage your child to achieve this.
This article originally appeared in Nairametrics on May 14, 2015.