Some friends, especially parents of second children, have expressed the idea of investing in education funds for their children, but when it comes to the education fund plan, it has been put on hold. There are also some parents who have no idea how much they should save for education, so they save a little more, and do not calculate the cost of going to college based on their children's age. It is foreseeable that there is a big gap between the actual amount saved and the education funds their children need.
So, should we save money for children’s education? When to save? How much is appropriate to save? What tools should I choose to prepare for education funds? Today we will analyze them one by one.
1. How much does it cost to educate a child?
In fact, most parents know that they should save money for their children to go to college, graduate school or even study abroad. It is necessary for us to understand how much money a child needs from elementary school to college, and then plan based on our own financial situation. Take our Zhuzhou published charging standards as an example. The cost of public kindergartens ranges from 800 to 1,500 yuan/month. Elementary school to junior high school is compulsory education. Public high school tuition is about 1,000 to 2,000 yuan. Annual tuition for private high schools ranges from 10,000 to 20,000 yuan. Generally, the education funds saved are mainly used for children to go to college, graduate school or even study abroad.
Since the 1990s, except for military academies and some public-funded students, most majors in our country's universities have required tuition fees. The first level is the first and second-tier public universities, with tuition fees generally ranging from 3,500 to 6,000 yuan. For example, Peking University 2021 electronic information, biological science and other majors are 5,300 yuan per year, and other majors are 5,000 yuan per year. The second level is the three private universities and independent colleges , which are much more expensive than public universities, generally 10,000-20,000 yuan/year, because the funding for such universities mainly comes from tuition fees, and they are slightly profitable.
The third level is Sino-foreign cooperative universities, such as New York University Shanghai , Xi'an Jiaotong-Liverpool University , Duke Kunshan University , etc. The annual tuition fees range from tens of thousands to hundreds of thousands. The teaching model of these schools is in line with international standards, the learning resources and living environment are better, and dual certificates can be obtained after graduation. Some families will choose to let their children go to school if conditions permit.
In addition to undergraduates, many children now choose to take postgraduate entrance examinations after graduation. Compared with undergraduates, postgraduate entrance examinations are generally more expensive. According to the information released by professional websites, I have included the postgraduate tuition fees of some 985/211, second-level, and Sino-foreign joint universities in the table. The tuition fees for academic postgraduate students in most schools are more than 8,000 yuan a year, and professional tuition fees are even more expensive. Some majors, such as EMBA, reach 200,000 yuan/year.
In addition to college tuition, living expenses are also required. There is a certain gap in living expenses among college students in first-, second- and third-tier cities. However, a monthly living expenses of 2,000 yuan for college students is currently “standard” for most families. Calculated at 2,000 yuan/month, the living expenses for one year in college are about 24,000 yuan, a total of 96,000 yuan in four years.
After analyzing the data, we can calculate the basic expenses required by a college student for four years at this stage:
Tuition is based on the median value of 6,000 yuan/year, living expenses are 2,000 yuan/month, and study tools are calculated as 10,000, which means at least 130,000 yuan is required; if the three-year graduate student (basic 8,000 yuan/year, living expenses 2,000 yuan/month) is added, the cost is 96,000, and a total of 226,000 is needed.
These are the current costs, so how much will it cost to go to college in the future? Prices are rising every year, and so are tuition fees. In 1989, a symbolic fee of 200 yuan was charged for the college fee reform. In 1996, China's higher education trial unified enrollment tuition fees rose to 2,000 yuan, and now average 5,000-6,000. In the past 30 years, college tuition fees have increased nearly 30 times, while national per capita income has increased 11 times, which cannot keep up with the increase in education costs. Therefore, when predicting the future cost of college, it is more reasonable to consider the increase factor.
Let’s talk about studying abroad. Generally speaking, international students are more competitive after returning home, have better career development prospects, and higher income levels.Data from the "2022 Overseas Graduates' Employment Competitiveness Insight Report" launched by Liepin Big Data Research Institute shows that priority positions for international students accounted for 10.15% of all positions in the past year, and their average annual salary is 244,300 yuan, which is 32,900 yuan higher than the average annual salary for all job recruitments. Nowadays, more and more families choose to send their children to study abroad. At present, the most popular countries for studying abroad are Australia, Canada, Germany, the United States, Switzerland , the United Kingdom and other European and American developed countries.
Taking the cost of major study abroad target countries and the tuition fees of the top 10 universities in the United States as examples, the average cost for each Chinese international student is 300,000-500,000 per year, and 750,000-1.5 million for three years.
And the tuition fees for studying abroad have risen rapidly in recent years. Taking the United States as an example, according to College Board data, tuition and fees at private four-year universities have more than doubled on average in the past 30 years. Most of the top universities in the United States such as Princeton and MIT that we are familiar with are private universities.
From the above analysis, we can see that the tuition and miscellaneous expenses for a child from birth to college need to be at least 500,000. Including postgraduate entrance examinations and studying abroad, the cost reaches 1 million to 2 million. Such high education expenses have become the main burden for most families. Even many working-class people cannot reach this amount of money after more than 10 years of income. Now, due to the great abundance of materials, the consumption patterns of many families born in the 1980s and 1990s have changed. After adding home loans and car loans to daily expenses, it is difficult for some families to save money. Just imagine, in the future, when children grow up and need large expenditures, how to ensure the supply of tuition fees while ensuring that the quality of family life does not decline? It can be seen that as long as we hope that our children can receive a good college education, preparing for education funds is a must-do for every family.
1. How to prepare for education fund?
As mentioned above, college fees at home and abroad are rising every year. How much does it cost for a child born this year to go to college at the age of 18? How much does it cost to go to graduate school? How much does it cost to study abroad? Based on the current increase and the current age of the child, we can actually calculate the future basic college education expenses. After determining the education fund target we need to prepare for our children, we can then prepare the education fund step by step, choose the appropriate tools, and increase in value over time. This is more scientific and will be easier for family finances. Children's education is a major matter for the family, and the amount of education money is not a small amount. Especially for families with two or three children, they must plan early.
So, when is the best time to prepare for education funds?
For a child who is now 0 years old, a conservative estimate of the cost of undergraduate college in 18 years will be 220,000 yuan. If you include about 200,000 yuan for graduate school, the total cost will be about 420,000 yuan. Based on the increase in domestic and foreign university fees in the past 30 years, we set an annual increase of 4% which is more reasonable. Assuming that the ideal tool we choose can achieve an annual return rate of 3.5%, starting to save at the age of 0 will require saving 1,333 yuan per month until the age of 18; starting to save at the age of 1 will require 1,417 yuan per month, and starting at the age of 5 will require 1,917 yuan per month; starting to save at the age of 10 will require 3,300 yuan per month, and if it is not until the age of 15, it will require 8,150 yuan per month.
has achieved an annual value increase of 3.5% for 18 consecutive years since the first year, and also needs to maintain capital. In reality, there are few tools to achieve this, so we can choose capital preservation, and after a few years of closed period, we can achieve 3.5% annual insurance. Taking a product that can achieve a stable annual interest rate appreciation of 3.5% as an example, if it is prepared in 15 years, it will cost 1,833 yuan per month starting from the age of 0 until the child is 15 years old; starting to prepare when the child is 1 year old, it will cost 1,916 yuan per month, and starting to prepare when the child is two years old will cost about 2,000 yuan/month. Starting at the age of 5, you will need 2,916 yuan per month, which is more than 1,000 yuan more than the age of 0. It can be seen that no matter what tool you choose, the same amount of money needs to be saved the earlier the time, because the appreciation time is longer. On the contrary, the later you start saving, the more the amount you need to save every month.
In addition to the earlier preparation, the better. The easy saving of education funds is also related to the tools we choose.
Common ways to save education funds include bank deposits, annuities, and life insurance.
1. Bank deposits: Save money based on income. After subtracting annual income from expenses, deposit in the bank regularly. This method requires a 1:1 cash reserve, that is, if the child needs 400,000 in the future, we must prepare 400,000 in cash. When the child is just born, we will save 20,000-30,000 per year.
The advantage of this method is that the amount of annual savings can be flexibly adjusted according to family income and expenses, and it needs to be saved every year. The disadvantage is that human nature's desire to continue to consume may not result in savings. The reason why most people cannot save money is because they have this thinking pattern: income - expenditure = savings. They are used to spending all the money they earn every month, especially now that "buy, buy, buy" is everywhere. Many people are unknowingly used to spending all the money in their accounts, and in the end they have no money to use for education savings ; even if they can save money, it can easily be misappropriated. When you save a certain amount, you will think about changing houses, cars, or borrowing money, which can easily lead to failure of your education savings goal. Of course, in real life, some people can resist the temptation of consumption and save money regularly without hesitation, but a few people can do it. The maximum term of bank deposits is 5 years. According to the downward trend of interest rates in the future, each transfer may face a decrease in income. For long-term goals, the loss of income will be more. We demonstrate that we can deposit money regularly every year as education funds. As for the interest rate, considering that it is declining year by year, we use the current interest rate of 2% to calculate.
This is an ideal way to save money. In fact, it is difficult to reach the 645,000 in the table in the 18th year, because the actual practice of most people is to spend the interest when transferring in the second year, and the renewal is an integer or the original principal; second, from 1996 to the present, the interest rate has dropped from 10.8% to 2%. With economic development, downward interest rates are a global trend, and China is no exception.
2. Annuity: It is divided into two types: lifelong annuity and special education pension. Both can be deposited on a regular basis, and the payment period can be flexibly selected. Generally, regular dividends will be automatically returned to the universal account, and will be revalued twice according to the floating interest rate at that time. The universal account calculates daily interest and monthly compound interest. You can choose to receive different amounts on demand when the child needs it most, such as college, Starting a business, getting married, or even accompanying the child for life; the payment method of the specialized education annuity is also more flexible. Unlike the lifetime annuity , a fixed amount is returned according to the child's age at school and starting a business for regular collection. Many education annuities can now also be paired with universal accounts for secondary appreciation. The interest rates of universal accounts are floating, and generally have a 2.5% guaranteed interest rate.
The advantage of these two types of annuities is forced savings. According to the education fund target required by the child, the amount to be invested is set. By saving at a fixed time and amount every year, the savings model is adjusted to: income - savings = expenditure to ensure the realization of the education fund target. This method must save on time and amount every year. If you quit midway, the principal will be lost. It is precisely because of the setting of this mechanism that we can overcome the weaknesses of human nature and ensure the realization of the goal.
3. Increased whole life, some people may ask: Isn’t the increased whole life based on a person’s lifespan as the compensation condition? Why can it be used as education payment? In fact, whole life has been improved and fixed interest rates have been set. For example, most life insurance this year is 3.5%, which means that 3.5% compound interest will increase every year until life. And in a certain year, usually 8-11 years, the current price exceeds the premium and increases simultaneously with the insured amount. That is, when the child reaches 18 years old, there has been considerable appreciation. At this time, part of the amount can be reduced as needed or all withdrawn. For example, for a certain type of life insurance with increased amount, parents invest 5 per year for their 0-year-old baby. Ten thousand, for 10 consecutive years, you can get 727,500 if you withdraw all the money by the end of the year when the child is 18 years old. If it is not needed at this stage, you can wait until the age of 25 to receive 925,400. If you choose to receive a reduced amount, the balance after the reduction will continue to appreciate at a 3.5% annual compound interest rate for life.
Compared with the floating interest rate increase of annuity, the interest rate of incremental whole life is fixed. The interest rate is determined in the contract when purchasing the insurance. The amount that can be withdrawn at each age point is also listed in the cash value table. Therefore, based on the amount of the target education fund, we can accurately calculate the amount that needs to be saved every year and every month based on the amount of the target education fund, starting with the end in mind. However, once you start this plan, you must make annual deposits into the account as agreed.
As an education benefit, annuities and increased whole life can also be added with the policyholder exemption function, which is also a key point that many parents should consider: when the policyholder (usually a parent) suffers a serious illness, accidental death or total disability during the payment period, he or she can be exempted from paying subsequent fees and is deemed to have been fully paid. The child can receive the full education benefit when it expires. This is a feature that all other financial management methods do not have. Among the 630 orphans confirmed in the "5·12" Wenchuan earthquake , only 12 were adopted by well-wishers in the following seven years. If the parents of these children can make arrangements for their children's education and life in advance, when these unpredictable disasters strike, at least they will not cause secondary harm to the surviving children and can ensure their good life and education.
Every choice will have its own gains and losses, just like choosing short-term financial management tools to obtain correspondingly high short-term returns. However, with each transfer, as the interest rate declines, we will lose long-term stable returns. Similarly, if we choose to obtain long-term stable returns, the price we need to pay is to sacrifice short-term returns.
Conclusion: Education fund is a rigid expenditure for every family, and it is rising every year. Above, we have analyzed the characteristics of three tools as education fund. The characteristic of bank deposits is that the time and amount of deposits and withdrawals are flexible, and whether the final amount can be saved and the amount due is uncertain; the commonality of annuities and extended whole life is mandatory savings. Once started, deposits must be made according to the agreed time and amount, and the amount deposited every year can be calculated according to the target. The interest rate of annuity is floating, while the interest rate of extended whole life is fixed, and the maturity amount is determined. The current interest rate is used to lock in future income. At the same time, both have optional exemption functions for policyholders to ensure that the children's education fund goals are achieved. Education is a major event for children and families. Preparing for education funds is a must-do for every family. The earlier you prepare, the easier it will be. Choose the appropriate education fund tools so that the prepared education funds will increase in value over time and interest rates. The articles and data above
are used as a basic reference. Each family has different educational goals. How to start with the end in mind, choose education fund tools and set appropriate amounts according to the age of your children. You need to calculate based on the table. If you need it, you can contact me to make targeted calculations and tailor-made education fund plans for your children.
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