By: Frances E. Pérez Mayo, Esq.
Senior Wealth Advisor Management / Assistant Vice President
Wealth Management Divison, BPPR
To provide a good education to our children is to expose them to a better professional and financial future. That’s every parent’s dream. The challenge, however, to attain this, is to develop a good savings strategy that may allow us to provide our offspring a good college education.
It is important to prepare a savings projection for educational purposes that take into consideration the following aspects:
- Accumulation time. We are referring to the time frame we have available to save before our children begin their college life;
- Annual average costs. Regardless of where your children decide to study, whether in private or public college institutions in Puerto Rico, the United States or any other part of the world, the costs vary significantly, and they, in turn, are affected by the respective inflationary indexes.
Once we know those factors, we can establish a meaningful savings plan, whether depositing a monthly or a global amount in the account, identifying it as college education. The cost of living and savings for retirement should always be evaluated so that they are not affected by other savings plans, such as the educational fund.
One of the advantages offered by some educational savings tools is the tax benefit for the person who makes the contribution. In Puerto Rico, for example, there is the Education Saving Account (ESA) in which up to $500 can be contributed annually per beneficiary, and those amounts can be deducted from the income tax return.1
Although in the past several years the available funds for scholarships have decreased, there are other alternatives to complement college tuition costs, such as student loans and work-study programs. As part of the process to identify college institutions, as parents we should participate in the orientations that each college offers in relation to available financial aid.
Let’s not forget that the key to build a better future is to begin to plan with sufficient time how to provide for the education of our children and thus take advantage of all the existing financial tools.
1 Information obtained from the Puerto Rico Internal Revenue Code; 2011 edition. For ESA, section 1081.05 (a).
The suggestions and recommendations included in the financial plan are offered only as an advice, with no guarantee of the yields of any product that may have been acquired pursuant to such recommendations. Banco Popular de Puerto Rico, its subsidiaries and affiliates, do not engage in the offering of accounting, legal or tax advice. If you need accounting, legal or tax advice you should request the services of a competent professional in these areas. Certain restrictions may apply, for more information please contact one of our service centers.