Savings Plan

THE GIRL NINJA

Lisa Gaspar

(Third of a series)

Since the amount, P5,945,971, we computed above is the estimated expenses 13 years from now which is the number of years before my imaginary child, Ella, is supposed to start college, then we need to adjust this figure to today’s equivalent.

This process is called the present value of money which means that a P100 today is doesn’t have the same value as a P100 a year from now. This difference in value is due to inflation rate and the interest our money can earn through investments such as the interest we receive from our bank deposits.

Let me illustrate this concept by using the following:

If I have P100 in January 1, 2013 to buy sinandomeng rice for P40 per kilo, then I can buy a total of 2.5 kilos. However, on December 31, 2013, because of inflation the price per kilo of sinandomeng rice increased by 3%, I need P103 to buy 2.5 kilos which means that the value of my money from January 1 to December 31 decreased by 3%.

Now if I deposited P100 in a savings account on January 1, 2013 with my favorite bank in Ilocos Norte and assuming the bank manager liked me so much she gave me 3% interest rate for my savings account. Then on December 31, 2013, I would have P103 in my savings account which means that the value of my money from January 1 to December 31 remained the same.

If I can earn 3% for my investments related to Ella’s college fund, then 13 years from now, I should have a total of P5,683,833. For as long as my imaginary daughter is in college and as long as her college fund earns 3% a year, then I need no longer to make additional deposits for her college funds. What this means is that even if I die a day before Ella needs to pay for her tuition fee for her first trimester for her first year, she will have no problem paying for it through her college fund. As a matter of fact, she will not have a problem financing her entire college education from her college fund.

The question now is, how much do I need to save every month or every year for the next 13 years starting now so I will have P5,683,833 on her college fund 13 years from now.

Assuming that my investments for her college fund will earn 3%, then starting today I would need to deposit P29,836 every month in my savings account which is also equivalent to P363,933 every year for the next 13 years.

Assuming that my investments for her college fund will earn 6%, then starting today I would need to deposit P24,141  every month in my savings account which is also equivalent to P301,016 every year for the next 13 years.

The higher the interest rate of your investment, the lower the amount you have to save every month or every year for your children’s educational fund.

If you think that the above estimated figures are too high and clearly beyond your means, then please bear in mind that these are just estimates. These figures will change if the estimates for tuition and other expenses and  inflation and interest rates change.

Regardless of how high you think these figures are, I encourage you to compute the equivalent figures for your children. This way at least you will learn you baseline figure and you know what you should save to provide the best for your children.

Children have no choice on whether they be born in a wealthy or poor family, but as parents we chose to have them. Consequently, the burden for financing their education shouldn’t be passed on to the children. It is us, parents, who should.

***

*If you want to know the breakdown of this amount, send me an email and I will gladly explain.

Please don’t hesitate to email me if you want my help computing for the amount you need to ensure that your children will have enough to use for their college education. I would be glad to help. Oh! Didn’t I tell you that I work for coffee?

(Liza M. Gaspar is a wealth coach and personal finance enthusiast. She also volunteers for the Rotary Club of Makati McKinley (rcmmckinley.org) and the Gerry Roxas Leadership Awardees (grlawardees.org). Engage her in a discussion about anything you fancy at www.thegirlninja.com, liza@thegirlninja.com or www.facebook.com/annalizagaspar).

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Our children deserve better

THE GIRL NINJA

Liza Gaspar

(Third part of a series)

In the previous column, we answered the following questions: Where will he or she study?

When will he or she go to college? While we will answer the following questions in this article which is the last part of a series of 3 articles on planning and saving for our children’s college fund. How much will you need to send her to his or her college of choice? How do you save for this amount?

How Much Do You Need

First, let us compute for the yearly expenses of sending a child to college.Let us assume that the child is going to start college in the coming academic year. We will adjust for inflation rate in the next computation. We need to collect the amount for each of the following items. Don’t forget to compute for the yearly amount.

This includes tuition fee, books and school supplies, dormitory rental, food allowance and money for school activities such as field trips.

This amount is dependent on what course your child will eventually enroll at. For example, if she plans to study hotel management, then she will probably join a lot of class field trips including out of the country trips which are pricey and she has to have pocket money, technology tools like cell phone and load, tablet, laptop or personal computer.

Second, we adjust the figure we computed above for inflation rate.  Inflation rate is the rate with which prices of products increase from year to year. For example, in January 1 of last year the price of a kilo of sinandomeng rice was P40 while it was P41.20 in December 31. Then we can say that the price of sinandomeng rice increased by P1.20 which is equivalent to a 3% (P1.20 divided by P40) inflation rate.

In the country, the National Statistical Coordination Board chose several products including rice to kerosene to monitor. The changes in the prices of these products (in economics and statistics parlance, these products are referred to collectively as basket of goods) are the basis for the computation of the inflation rate we often here on televisions and radios and read in newspapers.

The 2013 inflation rate according to NSCB is 3% which means that in general the prices of goods from January 1, 2013 and their prices in December 31, 2013 increased by 3%.

However, schools often increase tuition fees at a rate higher than the inflation rate. Some even increase tuition fees every year for as much as 10%.

For example, today the parent of a child studying at the University of the Philippines needs to pay as much as P30,000 per semester for tuition while my mother paid less than P5,000 when I was there more than a decade ago.

Let’s go back to my imaginary child, Ella. Assuming that for Expense Item Numbers 2 to 7 above, my estimate of the total if she’s going to college NOW is P690,000*. Remember this amount is what I would need if Ella is going to college now.

This means that we need to adjust this figure for the inflation rate. Let’s use this formula.

Formula 2

For Ella, in 13 years, I need about P1,013,288 for her other expenses during her first year. This amount will again increase by the inflation rate each year until she finishes college. The figure below summarizes the estimated other expenses for 4 years.

  

Based above, I will spend P4,239,220 for Ella’s other expenses for her entire stay in school. Adding this to her total estimated tuition fee, we learn that to send Ella to the college of her choice, I will spend a total of P5,945,971! No wonder some people don’t want to have kids these days.

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Don’t say it with flowers

THE GIRL NINJA

Liza Gaspar

        This is an edited English version of my contest piece for the 22nd Filipino-Korean Cultural Festival’s Korean speech contest’s final competition last Oct. 12. Though I didn’t win any award, a difficult fact for me to accept given my competitive nature, I had fun and learned a lot of things.

        I learned that speaking effectively is so different from writing effectively. Speaking is much more interactive and dramatic.I also learned that to give my best always, I need the help of a lot of people.

      To Teachers Bae and Noh for helping me correct the Korean version, to Mama and Jerry for helping me practice, and to all my friends who helped me, thank you so much. The contest rules asked the participants to deliver a speech about our lives.

         By sharing this speech, I hope that you gain a better perspective of how important it is for us to tell your loved ones how much we care for them, how much we love them, and how much we appreciate them in our lives.

***

A girl’s 18th birthday is supposed to be one of the most memorable days of her life. She becomes old enough to 

vote. She becomes old enough to receive flowers from suitors without her parents getting angry about it.

When I turned 18, it was supposed to be the time my father finally gives his permission for me to have a boyfriend. He didn’t give me that permission. Actually, he couldn’t. This year, this month in fact, it will be 15 years after he passed away.

Anyway, my father’s death was so sudden. All of us in our family, my mother, my sister, my two brothers, and everyone, were not emotionally prepared, but who is when a loved one dies? I haven’t seen my father for 5 months.

And at a time when Kakao Talk and Facebook were not even ideas yet, I also haven’t talked to him over the phone for about 2 months. Yet during the last moments I spent with my father, I don’t remember telling him “I love you so much, Dad” when I should have told him in every opportunity I had. During the first 18 years of my life, I am sure I have had thousands of opportunities.

In truth, and this makes me sad, I don’t remember saying “I love you” even once. Now, every time I go home, my family and I always visit my father’s grave. Every time we go, in front of his grave, we always say, “How are you Dad? We came home to visit you. We love and miss you so much.”

Also, sometimes we bring flowers. These visits always make me regret the opportunities I deliberately missed.What use are the words I tell my father now?

What use are the flowers when he can no longer appreciate them? No matter how many times I say “I love you Dad”, no matter how expensive the flowers I bring, he can no longer hear my words or see how red the roses are or even appreciate how fragrant the sampaguitas are.

No matter how many flowers I bring to my father’s grave, a single “I love you” when he was alive is worth a thousand of the most expensive flowers.

After my speech or when you go home, I hope you will tell your loved ones how much you appreciate them in your life and how much you love them.

For me, please tell your father “I love you so much Dad.” Don’t say it with flowers; tell him simply “I love you.” I wish I had told my father that every day.

***

(Liza Gaspar is a wealth coach and personal finance enthusiast. She spends her free time helping out with the projects of the Rotary Club of Makati McKinley (rcmmckinley.org) and the Gerry Roxas Leadership Awardees (grlawardees.org). Visit her Web site at thegirlninja.com, email her at liza@thegirlninja.com, or visit her at www.facebook.com/annalizagaspar and TheGirlNinja.com.)

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