Becoming a parent will likely be the best (and perhaps most difficult) part of anyone’s life journey. It will also bring about huge adjustment – there will be many new things to consider, from whether your home will be big enough to accommodate the newest member(s), to what you will need to have in place for them before they arrive. From a financial planning perspective this will also lead to an unknown when it comes to your monthly costs and saving capacity.
However, for most parents when it comes to longer term financial planning for their children, the biggest question marks surround the cost of education and setting their children up for entry into the adult world.
Options normally abound when it comes to education, from state or private secondary education to college, university or direct entry into the working world. The reality is that planning must cater for many unknowns. Where will you be living when your children grow up, will they want to go to a local school and university or would they prefer to move further afield etc?
For many people, this longer-term planning could also include things such as buying first cars or providing deposits for their first property.
As with most people’s financial planning the difficulty here is that everyone’s situation is different. The benefit of speaking to your financial advisor about this area of planning is that they can help walk you through the options, give you guidelines on present value costs and future adjust these costs, including inflation, to allow you to build a target for the future.
We will consider a simple example below. However, we must again remember that options abound and everyone’s situation will vary. University tuition fees, for example, can be hugely different around the world and even within countries themselves. In Europe you can expect to pay anywhere from zero to EUR 40,000+ per annum for higher education. In Australia and the US, in some cases, you could even double this figure.