Q: My wife and I gave birth to our first child a few weeks ago. What do we need to know about planning for our son’s education? How much should we save?

A: Congratulations on the new joy in your life.

A complete answer would require more information than you have provided. Calculating your future education costs is dependent upon your goals for your child’s education, country of residence, and the type and location of learning institution.

But for simplicity sake let’s pretend that you are planning to remain in Japan while your son attends a public University in a western country. Tuition fees vary widely depending on whether the student is a citizen in the country where the institution is located. For example, the University of Toronto charges US$8500 per year for Canadian citizens in its Commerce program, but charges US$21,000 for the same program for non-citizens.

In the absence of hard numbers to work with $US13,000 per year in tuition cost is a reasonable starting target. Of course this number needs to be adjusted quickly as new information about your son’s education aspirations become clearer. You may be able to revise this number lower, but it could also be higher.

While the cost of a four year education may amount to only $52,000 (four years tuition), the associated books, room and food will add a multiple to this amount. And since you are living as an expat you may want to allow for higher than average transportation costs in your budgeting, for occasional family visits.

And let’s not forget inflation and the rising cost of education. Since your son will not be looking to attend a post-secondary institution for another 17 or 18 years, the cost of attending will be significantly higher than it is now. If we begin with a current total cost of $100,000 for four years; then an annual increase of 4% will mean that the future cost of your son’s education is about $200,000 for all four years.

With net annual growth of 8% this target can be achieved with a monthly investment of $425 per month.

Of course there is the possibility that your son can take some financial responsibility for his education, or that scholarship opportunities will be available. But if we discount those options because of their uncertainty then your best bet is to begin investing on your son’s behalf as soon as possible.

Money Matter Q&A