Every parent wants the best for their children, especially when it comes to a quality education. Today, more families are considering paid options for education, from kindergarten through university.
When planning a education budget, it helps to start with the family’s overall finances. It’s also crucial to map out where and when the child will study. Some families intend to pay only for higher education, others for kindergarten or school, and many plan for both. Based on these preferences, it makes sense to estimate the final amount, accounting for inflation, and to begin saving early.
Starting a education fund early is advisable, perhaps from birth or even during pregnancy. That early window is manageable with straightforward tools like deposit accounts and savings accounts, which are appropriate for a shorter time horizon.
The target amount should be divided by the number of months until the chosen education milestone. For instance, if 100,000 USD is projected for kindergarten, and there are 2.5 years until enrollment, that splits into 30 months. Saving roughly 3,333 USD each month could meet the goal.
Saving for school requires clarity on how long the education lasts. Will it cover all 12 grades, or just a single year? By the child’s seventh birthday, it is often feasible to secure enough capital to cover all or part of the schooling.
As an example, private school tuition for all 12 grades might total around 180,000 USD per year, or more commonly a fixed total rather than annual. If aimed to fund the full program, dividing the cost by the number of years can yield a monthly saving target. For a seven-year horizon, saving roughly 2,000 USD per month could accumulate a substantial fund by the time school age arrives.
University savings are a broader challenge. The final choice of university and field matters since costs vary widely by institution. Yet the average annual cost tends to hover around 18,000 USD to 25,000 USD, depending on the program and location. Recent internal surveys show parents often estimate education costs at roughly the same annual figure for higher education as for the earlier years.
Compared with kindergarten and primary schooling, university planning benefits from a longer runway, giving room to diversify into a mix of investment types. Conservative insurance-based savings can be paired with market instruments to target returns that outpace inflation, while providing a guardrail against unexpected life events. Endowment life insurance products, for example, can offer growth alongside a death benefit, helping to guarantee that the education fund remains intact even if life’s plan changes.
Real estate as an investment for education funding is generally not recommended. Illiquidity can create problems if funds are needed quickly, and properties can tie up capital more than desired in this planning horizon.
What if the goal covers kindergarten, school, and university together?
For multi-year horizons, a diversified approach makes sense. Stocks, bonds, and deposit accounts can all play a role, alongside savings accounts that keep funds accessible. A long-term life insurance plan with regular contributions can serve dual purposes: it builds savings while providing a safety net. This ensures the intended amount is available for education even if some personal circumstances change, giving families greater peace of mind.
If there is an ambition to fund kindergarten, elementary and secondary schooling, as well as university, it is practical to designate three separate savings channels. Keeping these funds separate helps prevent accidental transfers and keeps each plan aligned with its specific timeline and risk appetite.
In most cases, allocating a portion of income specifically to education is prudent. A target of around 15-20% of take-home pay can keep education goals from pressing too hard on the family budget, while preserving funds for daily living. When children see their parents managing money thoughtfully, they learn valuable lessons about planning and responsibility.