CLERICAL OFFICER Janet Miller’s* stress level has escalated over the last few weeks because she was not prepared to cover the tuition expenses for her son, who will be attending university this academic year.

The private-sector worker was banking on her bonus that she usually receives to pay the expenses for his first semester. Unfortunately, her company advised the staff that because of its poor financial performance, a bonus would not be paid this year.

Miller’s heart sank as she read the memo circulated to employees. She now wondered how she would pay her son’s tuition.

For Delories Jones, senior vice-president of sales and marketing at JN Fund Managers, Miller’s circumstance underscores why it is important for parents and guardians to plan for their children’s education, particularly for their tertiary studies, which is often a very costly undertaking.

Investing is a good means for creating a pool of funds for future endeavours such as education financing, said Jones. And she advised that among the smart, long-term options parents can choose to meet their financial needs are mutual funds.

Investing early is key, she pointed out, as it allows parents to take full advantage of compound interest over time. With careful consideration given to financial goals, risk tolerance, and investment time frames, mutual funds can yield great benefits.

“The longer your investment horizon, the more time your money has to grow,” she explained.

She advised investors who choose mutual funds to select a mix of funds that suit their risk tolerance and goal-attainment targets, particularly since education expenses often have a fixed date.

“It’s essential to balance risk with potential returns,” she said.

By investing in a variety of assets, mutual funds spread risks, which can help balance potential returns with the level of risk one is comfortable undertaking. This is particularly helpful when saving for a fixed expense like education, the JN Fund Managers executive noted.

By setting up an Automatic Investment Plan (AIP) to automate a fixed contribution monthly, Jones said persons can also reduce the impact of market volatility through dollar-cost averaging. By that she means that the investor, by making a fixed contribution monthly, will, over time, benefit from a lower average price per share than if they had purchased all the shares at once. Therefore, if Miller had invested in mutual funds and made her contributions via an AIP monthly, she would be at an advantage in the long run, regardless of the market conditions over the lifetime of her investment.

As the goal date approaches, parents can shift to more conservative mutual funds, such as market funds, Jones said, to protect their capital and ensure stability until the funds are needed.

“Education funding is a long-term commitment. Be prepared for market fluctuations and avoid impulsive decisions based on short-term trends,” Jones cautioned.

Consulting with a financial adviser is critical, she advised, to develop a personalised investment strategy and staying informed about the performance of mutual funds, fees, and changes to the investment plan. Regularly reviewing portfolio statements is also essential for staying on track with financial goals.

* (Name changed to protect identity)