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Planning for Your Children’s Futures

April, 2006
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Irma’s daughter, aged 16 ½, has recently started her International Baccalaureate (IB).

  At this stage it is not expensive for her - like many other expatriates, the secondary school costs are paid for by her company.

  Her recent requests, like “Mom, can I go to a MID IB summer course at Cambridge University or at Harvard?” or “Can I please go to summer school next year in Switzerland?” are truly worthy ofserious thought.

  The tuition fees of a MID IB course for one week is US$1500. Taking into account afternoon courses such as study skills, SAT practice, extended essays, university tour guides, advice and so on adds a further US$1800. And she needs some pocket money for sure.

  “We will give her the chance to attend the MID IB courses as that will certainly benefit our daughter tremendously later in the IB Diploma Program,” said Irma Bollhalder. “And our son will follow in 4 years’ time…”

  What about the next stage – university?

  Higher education inflation is rising faster than other types of inflation. Some financial experts predict that the cost could even double or triple in the next 15 years. (See chart.)

  Meanwhile, banks, insurance companies and financial planners all agree on the timeframe: a 10-to-15-year savings plan/strategy will reduce the burden considerably. Of course, a lump sum, regular monthly savings or even a combination of several other options can be very effective.

  How large a fund each child will need depends on the country the child wants to study in. In some countries, the government might cover all or part of the university fees for their nationals, or have two fee structures: one for nationals and the other for international students. Besides, some countries are cheaper than others.

  “I know we are in for some expenses and now realize it is less painful if there is an education fund in place to help support these,” she added.

  And Irma Bollhalder has some valuable information from Tenbridge Asset Management, which offers something for us all:

  “How much do I need to save?

  “It depends.”

  The amount of money you need to set aside depends on how early you start to save, the total costs that are likely to be incurred and whether you would like to cover all, or some of these costs. You also need to consider whether you want to meet the full costs of university out of income and savings as they fall due, or whether you prefer your son or daughter to take on student loans to meet the majority of costs themselves, which can then be repaid at graduation from an investment plan. At the same time, you should take interest rates into consideration.

  The truth is, even saving a modest amount each month over a long time period will build up a significant contribution to the costs of higher education for your children.

  “When should I start planning?”

  “Now.”

  The earlier you start planning, the lower the financial commitment will be each month.

  Starting to plan now will provide additional peace of mind in knowing that should your financial circumstances change, you will have built some further financial security for your child. As an expatriate, you may be able to take advantage of onshore or offshore tax benefits that will significantly increase your investment returns.

  In fact, many university-planning accounts even allow access to some funds before university commences – useful if you later consider private schools that your company will not fund.

  Besides, putting in place a strategy allows you to take stock of your future plans and in particular what other expenditures you may have when your child goes to university.

  “What is the benefit of seeking professional advice?”

  “Professionalism.”

  An independent and professional financial advisory company will not only explain to you some technical terms of expenditures, but there will also be serious talks on likely costs, the effects of inflation, the combined costs for children of different ages, and of course planning options. The company can also help select the best plan available from a range of global institutions to ensure that you get the plan that best suits your particular requirements.

  At the same time, offshore tax benefits (if they are applicable) will be explained – these can make a huge difference to your investments.

  Keep in mind that most financial advisors offer a free initial meeting for you.

  “Whatever financial plan or strategy is chosen, it should not be easily accessible, so as to avoid using this fund for other purchases. Everybody wants the best for their child, so starting early is a key factor.”

  THE CHART will be put in the middle of the article.

  University costs tend to increase more rapidly than other costs. The chart shows the average annual cost for a public and a private university at the most popular destination for overseas students, the United States, adding 5% inflation each year. Please note that for the most expensive private colleges, the costs are considerably higher.

Year Public Private

2006 $11,351 $30,207

2007 $11,918 $31,717

2008 $12,514 $33,303

2009 $13,140 $34,968

2010 $13,797 $36,717

2011 $14,487 $38,553

2012 $15,211 $40,480

2013 $15,971 $42,504

2014 $16,770 $44,630

2015 $17,609 $46,861

2016 $18,489 $49,204

2017 $19,413 $51,664

(Source: Tenbridge Asset Management)

Tenbridge Asset Management

Tel: 010-8580-1755

E-mail: info@tenbridge.com.

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