Practical Savings for Education

By Francisco J. Colayco, Ph.D

We have been talking about how you can look at Education from another point of view in the past two columns. I want to discuss how you can save in the next two columns.

Usually, tuition may be paid annually, semi-annually, quarterly or even monthly. In some cases, there is a discount given for payments paid in advance of the school year. If the discount is bigger than 3%, which is what a short-term savings deposit will yield, then, it is best to take advantage of that discount. Sometimes, this is not clearly stated in the schedule of amounts due. Be sure to compare the amounts carefully so you understand what you are actually paying for.

For example, if the annual tuition is PhP10,000 and the monthly payment is PhP1,000 for ten months, clearly, there is no discount given for paying in advance. However, if the monthly payment is say PhP1,100 for ten months, then you have a 10% discount if you pay PhP10,000 in advance. This is like “investing” your money in paying for tuition in advance at 10% rather than putting it in a savings account that will only give you 3%.

If there is no discount given for advance payment, strictly speaking, it is best to just pay on installment but there are reasons why you should consider paying one time in advance if you have the money anyway.

1) You are sure you will not spend the money. It is so easy to “borrow” the tuition fee for some other expense and you might end up with nothing to cover for it when it is time to pay.

2) You might forget to pay for the installment and when you forget, you will probably be charged a late payment fee. Furthermore, your child might be embarrassed. Schools usually check on non-paid accounts right before an important exam.

This tells you that it is best to be prepared to pay for tuition on an annual basis. However, like most, you are probably more aware of having a monthly budget. If you really pay tuition monthly, then it is part of your monthly budget. However, in many cases, tuition paid annually or semi-annually is sometimes forgotten. Then, when payment is due, there is a last minute panic and the money comes out of an emergency fund, or borrowing from relatives and friends or even from a credit card. YOU DON'T WANT THIS TO HAPPEN!

In the next column, I will show you how not to make this happen.