How to Earn as you save for your Child's Education

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Image by Herbert Bieser from Pixabay 

Among the several subsidies that were discontinued starting the year 2023, education was on the top list with the Ministry of Education discontinuing the subsidy that was introduced in 2020. The ministry had previously reduced the fees by Ksh. 8,500. However, according to a circular from the ministry, parents would still have to pay the same fees as before the reduction, which is Ksh53,554 for national schools. Currently, national schools pay Ksh45,054, while Extra County and County schools pay Ksh35,035.

The withdrawal of education subsidies in Kenya has had several effects on parents, particularly those from low-income families. Education subsidies were introduced in the country to make education more affordable and accessible to all, especially those from disadvantaged backgrounds. The withdrawal of these subsidies, therefore, has had several negative effects, including: increased cost of education, higher dropout rates, lower enrollment rates, increased poverty, and increased inequality. It is, therefore, essential for the government to invest in education to ensure that it is affordable and accessible to all, particularly those from disadvantaged backgrounds.

So, how should I prepare?

Education is a valuable investment for any parent, and it is essential to start planning and saving early. In Kenya, the cost of education continues to rise, making it even more important for parents to find ways to save for their child's education. While keeping money in a savings account has been the traditional way popularised by the commercial banks and may seem like a safe option, the interest earned is usually very low, and inflation can easily erode the value of your savings over time. Therefore, it is important to explore other options to ensure that your child's education is adequately funded. Here are some of the best ways a parent in Kenya can save for their child's education.

Education Savings Plans

Education savings plans are investment vehicles that allow parents to save for their child's education. These plans are offered by various financial institutions, including banks, insurance companies, and asset management firms. Education savings plans are designed to grow your savings over time and offer competitive returns. They also come with tax benefits, making them a more attractive option compared to savings accounts. It's important to do your research and choose a reputable provider that offers a plan that aligns with your goals and risk tolerance.

Unit Trusts (Money Market Funds)

Unit trusts, famously known as Money Market Funds, are another investment vehicle that parents can consider to save for their child's education. A unit trust is a pool of money that is managed by a professional fund manager. The fund manager invests the money in various assets such as stocks, bonds, and real estate, among others. Parents can invest in a unit trust and earn returns that are commensurate with the performance of the underlying assets. Unit trusts are a flexible investment option as you can invest small amounts of money regularly and can withdraw your investment at any time.

Stocks

Investing in stocks is another option that parents can consider when saving for their child's education. While stocks are considered a high-risk investment, they offer the potential for higher returns than other investment options. It is important to do your research and choose stocks that have a history of strong performance and are likely to continue growing. Additionally, investing in stocks requires a long-term investment horizon, and parents should be willing to ride out any short-term fluctuations in the market.

Real Estate

Investing in real estate is another option that parents can consider when saving for their child's education. Real estate is a tangible asset that tends to appreciate in value over time, making it an attractive investment option. Additionally, investing in real estate can provide a steady stream of rental income that can be used to fund your child's education. It is important to do your research and choose a property that is likely to appreciate in value and generate a good rental income.

In conclusion, there are several ways that parents in Kenya can save for their child's education other than keeping the money in an education savings account. Education savings plans, unit trusts, stocks, and real estate are all investment options that can offer higher returns than a savings account. It is important to do your research and choose an investment option that aligns with your goals and risk tolerance. By starting early and investing regularly, parents can ensure that their child's education is adequately funded.

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