3 tips to saving and finance for children’s education

It is never too late for you to learn how to finance your children's higher education, although it is always better to start early.

Imagine that you are already an independent person and decide to start a family. You have two children: one and three years old respectively. You need to start saving. The only thing you think about now is to provide them with the best opportunities and tools so that they have a proper childhood and development.

However, there will come a time when you will need to think about how to finance your children’s higher education. That’s when you realize that somehow you have to find a way to raise money to make possible what most parents dream of: giving them the opportunity to study.

If today a family has more than one child studying, the monthly expense can easily exceed $700,000 depending on the degree. No one knows how this value can evolve in 20 more years, therefore, providing the opportunity to study entails a significant expense that must be resolved in some way to prevent them from starting their professional lives in debt.

The future independence of your children starts with a good saving habit

Being a parent and investing in higher education is rewarding. For the same reason, we want you to learn how to do it regardless of how old your children are. Here are 3 tips for you to start saving as soon as possible:

-Analyze your saving situation:

 the ideal is to start raising money from the birth of your children. If you started saving later for higher education, it is very important that you see what state your current financial situation is, know how much money you have to pay for your studies and consider if you eventually require some type of financial support.

-Start with a term deposit: 

start a savings plan with a fixed term deposit, which allows you to save a certain amount of money in a bank each month for a certain period of time. After that period, the entity will return the money, along with the agreed interest.

For example, if you start saving $10,000 a month for 18 years from the birth of your child, you will achieve a capital of $2,160,000. To this, add the monthly profitability of that value, which despite not being high (0.5% approx), will finally add up to a total of approximately $1,730,000.

In short, of the total you save with a fixed-term deposit plan, just over $2,100,000 will correspond to the funds you deposited, and the rest ($1,730,000) to interest payments from the bank.

However, the total savings can even be doubled depending on the type of investment tool you are going to use. Currently, some banks offer up to 1% per month of the total interest on time deposits.

-Open a savings account for children: 

if you did not start saving since the birth of your child and a few years have passed, you can open a savings account for children. Consider that you will have to compensate for the lost years.

Opening a savings account for children is an option that several banks in Chile offers. You can start with an initial amount of between $1,000 and $10,000, and thus help your child to study “for free” in the future.

Little by little, Chilean families are becoming aware of instilling the habit of saving in their children. According to the Commission for the Financial Market (CMF), there are currently around 17 million different types of savings products activated in Chile (with figures as of 2018).

Despite not having the exact number of how many correspond to or benefit minors, it is known that these products are a good financial mechanism for them to save their money and thus ensure their studies.

Start as soon as possible

Chileans in general are bad at saving, but there is a growing awareness of this important habit, especially when it comes to doing it voluntarily.

If you start saving when your children are young, you can reduce their need to apply for a loan in the future, while you earn interest by opening a fixed-term saving account for them.

As you have seen, the secret is to save constantly, and if possible, gradually increase the amounts. Here the time and the interest rate offered by each bank will play in your favor.

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