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All experts agree that saving alone won’t make you rich—it’s when you invest your money that you can thrive. “Saving is spending the money that you have now at a later time, which in theory, could actually diminish its value,” says Germee Abesamis, an independent portfolio manager. “Investing, meanwhile, is making this money grow.”
But, before taking the leap, heed the advice of Fitz Villafuerte, a registered financial planner and blogger, “Ignorance is very expensive. Invest when you’re properly educated. You can’t copy someone else’s strategy in becoming rich. You have to pattern it after your own goals.”
Joe Ferreria, president of Money Doctors, agrees with the logic, and he adds that you spend when your investments start making money. “I’m not saying spending is wrong, but it’s wrong when you save to spend. Save and grow the money by investing--then you spend.”
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The question now is: how much can you invest?
Start investing with an amount you’re comfortable with, and then diversify your portfolio. Cheska Sarusad, a financial planner for Sun Life, says that there’s always a tradeoff with investing. “If you want to invest small, make sure the time is long.” If, however, you have a shorter time frame, you’ll need to invest more.
Where to invest? As parents, our child’s education fund is definitely a priority, and investing for it is one of the ways you can secure your child’s future. Here are a few ideas on how to do just that depending on how much you’re willing to invest:
P50,000
If you have a year before school starts:
Stash it in a savings account that earns interest with your trusted bank. It may not earn as much when you compare it to money in stocks, but considering that this amount needs to be pulled out immediately, it can’t be tied down to something with a higher risk.
If you have 10 years before your kid goes to college:
Ramon Tejero, program director and head of Retail Equities E-Commerce for Maybank ATR Kim Eng Securities Inc., suggests that you “put your money in an equity fund.” An equity fund is also called a stock fund, where your money is put mainly in the stock market, making the risk higher, but the returns greater.
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P100,000
If you have a year before school starts:
Try Unit Investment Trust Funds (UITFs), with either a bank or a professional financial planner. Funds from various investors are pooled together, and the funds are then invested in different instruments, such as bonds and equities. Unlike investing directly in blue chip stocks or other long-term instruments, it still gives you the benefits of having your money invested in something with a bigger risk that will yield higher returns, but you remain liquid, since you can redeem the money you’ll earn at any time.
If you have 10 years before your kid goes to college:
Invest in fixed income investments, such as government bonds, time deposits, and corporate bonds, or in mutual funds and a bond fund. The trade-off with these investments is once you place a certain amount of money, the payoff is around after a decade—but the money’s steady growth is best for those with a low-risk appetite, and for those who want the assurance that the money will be there when they need it.
P500,000
If you have a year before school starts:
Look into getting cash flow assets, especially if you’re pushing into your senior years, or trying to save up for retirement. “These are preferred shares, treasury bills, high-dividend companies like PLDT,” Ferreria suggests. “These companies are where you invest in because it gives you a regular cash flow every month.”
If you have 10 years before your kid goes to college:
With this substantial amount, you can diversify your portfolio. Find a registered financial planner or a relationship manager. (Log on to rfp.ph or ask your trusted bank.) “The manager can help you with equities, bonds, the money market, with peso products, and even offshore dollar products,” says Tejero.
A version of this article originally appeared in the March 2015 issue of Good Housekeeping Philippines under the title "How to pay for your child's education." Edits have been made by the SmartParenting editors.
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