I created an education plan for my children to achieve at least master's degrees. My youngest is two and the elder four. How much would it cost for them to achieve that goal? And how much should we save to ensure we can support that goal? My wife and I have combined savings of 2 million baht, but this is not really savings, as we need it for working capital for our business too. Any suggestions?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA They used to say a good education was priceless, but these days we know exactly what it costs _ and it isn't cheap. I have a four-year-old myself and am paying 470,000 baht a year for him to attend Harrow International. My first cousin enrolled her two sons into a popular Thai school and she is paying 32,000 baht a year; not counting the 1 million in "tea money". Simply put, financing two children all the way through graduate school will cost an arm and a leg.
It is advisable to separate your college savings from your other investments. Out of that 2 million baht, you need to decide how much you will need as working capital for your business, and the rest can be dedicated to college funding.
The first rule is to make sure your investments grow with your children by basing your asset allocation on your children's age. The main strategy is to take more risk in the early years, when you've enough time to make up for short-term fluctuations.
With tuition costs rising faster than inflation, a portfolio tilted toward stocks is the best way to build enough savings in the long run. Investing just 10,000 baht a month for 18 years can yield 4.8 million, assuming an 8% average annual return.
I keep all my funds in a savings account. How can I be sure my emergency funds are safe here in Thailand? What are my options?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA First of all, take a look at your overall net worth. If you have steady, positive cash flow and relatively low debt, there is no need to keep so much in cash. In general, you only need to keep about six months' worth of living expenses in bank deposits. Or you may want to take a bit more risk by investing the fixed-income portion of your portfolio in short-term (money market) bond funds.
Lessons from the Asian crisis in 1997 and the sub-prime crisis in 2008 have taught us no banks are too big to fail. The world has changed, and systematic risk is increasing not decreasing. Given the severity of public debt crises in Europe, Japan and the US, even governments can and likely will go bankrupt.
Small banks are perceived to be riskier than big banks, but this is not always the case. You should look at the banks' financial statements, share prices and credit rating as guidelines.
Spread your deposits over several banks to minimise the risk, and decrease your exposure in any one bank (remember these must be different banks; multiple branches of the same bank do not count) to below or possibly slightly above the million-baht deposit guarantee threshold.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through firstname.lastname@example.org or the TFPA webboard, www.tfpa.or.th
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Writer: Thai Financial Planners Association