Your wife just gave birth to a wonderful bouncing baby boy (ok, ok, a bouncing baby girl). You’re ecstatic. You can’t explain the rush of emotions upon seeing your first-born. Fatherhood is a great feeling, as I also first discovered two years ago, and I can’t blame your joyful shouts and solemn prayer, thanking God for keeping your mother-baby team from the risks of childbirth.
I don’t want to be a killjoy, but let’s put an end to all the celebrations and start thinking about the future. There are so many things to consider, almost all of which involves the peso sign. Let’s start with your child’s college education.
Last night, my wife was busy tinkering with Microsoft Excel, trying to figure out how to raise a value to the nth power. I found out later that she was trying out the formula featured in the April 2008 edition of Working Mom magazine. She figured out the formula, which we’ll be featuring out later. In the meantime, the formula featured in the Working Mom magazine goes something like this (for those who abhor algebra, please jump to the later parts):
A = current tuition
B = average rate of tuition increase
C = number of years until your child reaches college
Projected Tuition = A x ([1 + B] raised to the power of C)
(Yes, I know there’s a better way of presenting that formula, but that’s easier done with a pen and paper, not here. The value of C is 15 for the 1st year. C is 16 is for the 2nd year. So on and so forth.)
We used that formula to compute the college tuition of our 2-year old son, using the following data:
A = 120,000 (current tuition)
B = 10% (average rate of tuition increase)
C = 15 (number of years until your child reaches college)
Here’s what we came out with:
501,269.78 — 1st year college
551,396.76 — 2nd year college
606,536.43 — 3rd year college
667,190.08 — 4th year college
The TOTAL? P2,326,393.05. That’s more than 2 Million Pesos. That’s good for 3 cars. It’s equivalent to P155,092.87 per year (computation: TOTAL divided by C) starting now. That’s roughly P13,000 per month (computation: [TOTAL divided by C] divided by 12) that we need to save. My wife was disappointed because she thought the 2,000 per month she’s currently setting aside would be enough. While savings is a crucial aspect in preparing for the future, including your child’s education, it may not be enough. In our next article, let’s discuss the tricks in achieving the monthly amount that needs to be set aside. In the meantime, you could head out to the Pinoy Entrepreneurs for some ideas.
Oh, I almost forgot, here’s the formula to make your life easier. Download the College Tuition Calculator (excel file), then substitute the numbers only inside the box (again, inside the box ONLY). The figures at the bottom will automatically change. Good luck. =)
O my! Laki na ng gastos. Home school na lang ang gagawin ko or padala sa US para sa free public school education during middle and high school.