The Insider’s Look: Choosing the Right Education Plan to Finance Your Child’s University Education

23 October 2018

Every parent wants the best for his/her child, and that includes financing your child’s education to attend his/her dream school. With the increasing cost of tuition, it can be daunting on any parent, to imagine how you will be able to afford giving your child the best higher education opportunity. This article gives you an expert perspective, in order to help to guide you in choosing the best education plan to finance your child’s university.

Cost of Tertiary Programme
In planning for your child’s university education, it is important to first determine the full cost of the programme and not just the first year, so that you can be adequately prepared. Whether your child is a few years away from attending university/ college or over a decade, explore the projected cost of the full university/ college education, with your financial advisor, so that there are no surprises. The projected cost to attend university locally within the next 15 year is approximately J$3.3 million (for government funded programmes) with an average US-based university programme being in the range of US$250,000 to US$300,000.

Choosing Your Education Plan
All education plans are not created equal, so it is important to know the ‘perks’ of each plan. Here are a few pointers to consider when selecting the best education plan to get your child to his/her dream school:
•   Your risk profile: You should choose an education plan that is in alignment with your risk profile – whether conservative, moderate or aggressive; bearing in mind that the more aggressive investment plan provides higher returns.
The JMMB Graduate (investment plan) allows you to customize your plan to match your risk profile, and therefore your return. Although past performance, is not a guarantee of future performance, the 12-month period, August 2017- August 2018, gave investors a return of between 7.8% and 9.8%, based on their risk tolerance.* You can also opt for more conservative education plans, such as, one of the popular education plans on the market, however your approximate return will be lower, as those plan, in a similar period gave parents, approximately less than 3% return.
•   Earnings/ Returns: You want the best return on your investment, and although some education plans will guarantee you a fixed rate of return, this return may not allow you to beat inflation and therefore limit your ability to adequately prepare.
Additionally, decide if you intend to send your child to an overseas or local university. As it is best to choose an education plan that allows you to invest and/or get your returns in foreign currency, such as the JMMB Graduate (US$). This allows you to protect your funds from any depreciation of J$, while easily tracking the progress by investing in the target currency, e.g. target amount of US$250,000.
•   Other ‘Perks’: Some plans offered by other local financial institutions have the added benefit of eligibility for a grant, based on the amount you have accumulated in your education plan.

Comparing Education Plans
The table below will help you to better ‘shop around’ for the education plan that fits you.

	Education Plan A	Education Plan B	JMMB Graduate	Education Plan C	Education Plan D	Education Plan E
Minimum Investment	J$3500	J$2500	J$100,000	J$500	J$1000	J$5000
Monthly Investment	J$5000	J$5000	J$5000	J$5000	J$5000	J$5000
Grant/ Scholarship	J$350,000	None	None	None	Eligible to apply for scholarship	None
Estimated Rate Per Annum:	2.1-3.1% (Variable )	2-4% (Variable)	7-12% (Variable)	8% (Variable )	1.9-3% (Fixed )	7.7% (Variable)
Currency of Education Plan	J$	J$	J$/ US$	J$	J$	US$

*The rate of interest used in the above table, represent the performance/ interest rate quoted as at September 2018 from local financial institutions. Past performance is not an indicator of future returns and interest rates are subject to change. Although the calculations above are representative of the performance and projected return, these figures are primarily used for demonstrative purposes.

Invest Early in Education Planning
Having shortlisted the best plan for you, start planning early. This will allow you to benefit from the “compound effect” the earlier you start planning for your child’s education. This simply means that your investment will continually grow at intervals with compound interest, with the same investment.
To get started with your JMMB Graduate (investment plan) account, you will need J$50,000 or US$500 respectively. Parents may explore using education plans with a lower starting balance, if you are not able to start with the minimum amount for JMMB Graduate. You can also opt to start with a smaller amount, in another account such as the JMMB Giltedge, which is a unit trust account, offering both US$ and J$ options; and a starting balance as low as J$11,000 or USD $100, respectively, and then open a JMMB Graduate when you have sufficient funds.

Although temporarily, you will earn returns less than the JMMB Graduate, you would have begun your education planning, and still earn interest on your investment. With consistent contributions to any of these education planning options and the interest earned, you will have sufficient funds to open a JMMB Graduate, later.

If you realize you have a shortfall and limited funds, and little time to plan, all is not lost, as, you can explore the supplemental options such as: a combination of loans and your investments and/or grants/scholarships (which some education plans offer) and low or no-interest payment plans that may be offered by the child’s school.

In choosing an education plan, ensure it is customized to suit your financial circumstances, realizing one size does not fit all. In addition, like any other investment, careful tracking of its performance is important.

If the JMMB Graduate is the right education plan to help you to make the dream of financing your child’s education a reality, open your JMMB Graduate account today.