As we start planning for the New Year, one of the expenses that seem to cause the most amount of stress is School Fees. It comes just after the holiday festivities when the wallet has become quite empty. This, for most parents is a never ending scenario and every year or every term comes with the anxiety over finding money to pay school fees. Well what can we do different next year to ensure we are in a better place to handle this? The definition of madness is doing the same thing and expecting a different result hence something in our planning for education has to change.
The answer of how to plan for the immediate education expenses is simple. The crucial ingredient in making it work is the discipline. Determine what amount you will have to pay in school fees and related expenses such as books and uniforms for a year. Divide that amount by 12. Put that amount monthly in a separate savings account or savings product. For example if your annual school fees costs come up to Kes 120,000 (Kes 40,000 per term) per year. Save up Kes 10,000 every month. This will mean that you are a step ahead of your payment obligations so when the fees is actually due, you are ready with the amount. Secondly you will avoid running around at the last minute looking for school fees funds and worse still, incurring debt. We tend to start looking for money only when it is due so this process starts to make us plan ahead. In time, and evidenced by the clients I have actually worked with, you will start to find yourself with the school fees a term or even a year in advance of when the payment falls due. For example if you can actually put aside Kes 15,000 per month which is Kes 180,000 per year. You will have an extra Kes 60,000 which is already half the school fees of the following year. As you go along this can get bigger and bigger and you can then start planning early for longer term education costs such as high school or university.
Where should you keep the money you are keeping aside for school fees? Definitely not in your current account where you may be tempted by a Christmas sale to withdraw it. Keep it somewhere you don’t have access to on a daily basis and somewhere safe – where the money does not lose value. Examples of this are a Savings Account or Money Market Fund. If you are 3-12 months ahead of your payment obligations you can invest the funds in Treasury Bills. For your longer term school fees needs you can also choose to invest in places that can grow the value of your money. This carries more risk but then you also have the benefit of time on your hands.
Discipline is key. Planning for this crucial expenditure leads to a Happier New Year!
Waceke Nduati Omanga| waceke@centonomy.com