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What is the cost of a college education, and why should I start saving up?

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What does the hard data show about college education costs..?

As parents, it's natural for us to think about our children's future.When we visualize their future, what do we see? Watching them getting a college education and graduating is probably one of the first thoughts that come to mind. At some point have you started to analyze how much does a college education cost? Let us present you the average expenses for college students in Latin America:

In Mexico, pursuing a college degree with an average duration of 4 to 5 years costs around $40,538 USD, and this is without taking into consideration additional living expenses (such as housing, food, transportation) that are around $10,386 USD per year.

In Chile, a college education costs an average of $36,588 USD and to that we still have to add living expenses such as rent, food, utilitis, transportation... which are on average $10,068 USD per year.

Now, if you wish to study abroad (in the US, for example), a college education costs an average of $228,271 USD , and living and school expenses add up to an average of $25,200 USD per year.

We also have to point out that college education costs increase by an average of 7-8% each year, double the rate of economic inflation! You're probably wondering what's the reason for such a rapid growth, these are some of the main reasons:

-Nowadays there's a higher demand for access to a college education than there was in the past.

-There are not enough open spots in the universities for the number of students who enroll each year, nor are enough schools being built to keep up with the demand.

-Most of the top universities are private, and by being businesses, they seek to maintain or increase their profits.

Without a doubt, a post-secondary education is a heavy expense, and for that same reason, what better than planning in advance so that once we have to face this expense, we have enough capital and we can avoid falling into debt, sell our assets, or even deny any opportunity to our children due to the lack of resources.

How can I prepare myself for this expense?

In this case, you definitely have to save, but, what is the smart way to save? If you are one of those who usually keeps their money under a mattress or in a piggy bank, you may want to reconsider your saving methods. If you are saving for the long-term, you have to remember the effect that inflation will have on your future cash savings. Your money will not have the same value or purchasing power if you simply stash it for years and years... so what is the best way to make the most of your money?

An educational savings fund is a tool that allows you to make periodic contributions that will go to a savings fund, during the saving period your funds will grow according to inflation and eventually once your children reach the age of attending college, they will have that savings fund that has been accumulating for several years to pay for their school expenses. Just like in a retirement plan, time is your bestally in this type of plan. The sooner you start saving, the lower your monthly contributions will be and you may even reach your savings goal sooner than expected.

Where do I start?

The first step is to take financial advice, since each person's situation is different. There are several factors to take in consideration to find the plan that best suits your possibilities and goals. Remember that at KNG International Advisors we offer free consultations. Do no hesitate to contact us to schedule yours!

If you would like to know more about this, we invite you to try our educational fund calculator.

 

The best time to start planning your children's future is today.

Now that you have a better idea of what educational savings funds are and how they work, the first step to start a fundamental financial project for your family's future is to take professional advice.

Try our KNG educational savings fund calculator

It is an educational savings fund calculator, which will give you estimates based on the information you provide and will help you estimate the capital you must accumulate to be able to pay for your children's education in the future. (You can access it by clicking the button below)

Educational savings fund calculator

Free financial consultation with KNG International Advisors

Do not hesitate to contact us for a free consultation, in which you will be given a complete analysis and personalized options for retirement or other heavy expenses, such as educational expenses for your children.

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How much should I save for my retirement and why should I start saving now? 

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Some hard facts about how mexicans prepare for retirement...

Today, in Mexico there are 128.9 million people, of which 57.7 million are economically active, and 60% of them do not have a retirement plan. This means that, around 34.6 million mexicans who are part of the economically active population do not have savings or a defined plan for when they are older.

According to results from a survey carried out by the AMAFORE, 72% of those interviewed have not made plans to retire from work. Another survey carried out by this same institution also indicated that 48% of mexicans do not feel responsible for thei retirement (that is, they plan to rely on their children or they think that the government aid they will receive will be enough to survive), 9% believes that saving will facilitate their retirement, and only 1% recognizes that saving is necessary to have a decent life upon retirement. 

How do I prepare for a good retirement? 

There are many factors that can influence a good retirement, for example: good medical insurance, savings, being debt-free, etc. But without a doubt, a retirement plan is a fundamental tool to help us be prepared and to have financial freedom without being tied to a job.

What is a retirement plan?

A retirement plan consists of regular savings in long-term diversified investments. Its purpose is to create enough assets to cover all retirement expenses. You start this savings plan when you're young for a stipulated period, that is, from the start date of the plan, until reaching the age at which you want to retire.

Contributions are normally made on a monthly basis, they are invested in formal savings instruments that offer annual growth on the investment and the retirement plan is calculated in such a way that at the end of the investment period, whoever owns it can generate income from life from accumulated assets. This is with the purpose that, once you reach old age, you can replace the monthly income you would usually get from working a job and to maintain the same standard of living without any type of concern. 

What is the first thing I should know if I am thinking of starting a retirement plan?

  1. If you want to start a retirement plan, we recommend you set a goal of making a monthly contribution to this plan. The contribution will vary according to your specific saving abilities, that is, according to your income, expenses and specific objectives, there vary depending on each client: for this reason the plan must be tailor-made for you, covering your and your family's needs.
  2. It is very important to establish a goal at the beginning to be able to measure and adjust that contribution during the saving period. You don't want to fall short and not have the time to make up for it! 
  3. At KNG, we always recommend that before investing in any instrument you contact your financial advisor. If you do not have one, KNG's main service is to offer you a free consultation to ensure that the investments you make are in line with your investor profile (avoiding any type of future decapitalization).

It is a reality that the cost of retirement is getting higher and higher and the numbers do not lie. If we put it in perspective, our retirement costs are much more than our house mortgage...

Neil Emberson – CEO of KNG International Advisors

How do I benefit from a retirement plan? 

  • Compound growth: It is a long-term savings in which all profits are reinvested, so the longer you leave your money working, the more exponential your growth will be.   
  • When the savings period ends, we recommend withdrawing the net income from inflation and leaving the capital invested. For example, if inflation is on average 2% per year and our growth is 8%, we will withdraw the difference, 6%. This allows that the 2% that we are leaving in our retirement plan helps our capital and assets to continue to grow in parallel with inflation. If we do this, our annual income will grow proportional to inflation. 
  • You will enjoy your retirement the way that you want, without having to worry, depend on relatives or government aid, among others. 

How do I start my retirement plan? 

You have to take into consideration certain factors that will help you choose the plan that best suits your needs: 

  • Age at which you wish to retire - The sooner the better in order to maximize the effect of compound growth. 
  • Your life expectancy -Along with a realistic estimate of the amount you need monthly to cover all your expenses.  
  • Consider the inflation -And have an idea of where you plan to spend your retirement, since depending on the place you choose to live, your money will last differently. 

Below, we will show you a savings projection of $500 USD per month assuming an average annual growth of 8% in different terms, in a globally diversified portfolio. The strategy and risk profile of the investment is according with your age and your preference. As you can see, profits are more considerable if the savings term is longer. 

This table shows projections, they are not guaranteed amounts. Assuming that the investment portfolio grows 8% annually during the savings term and then during retirement.

Now that you have a better idea of what retirement plans are and how they work, the first step towards starting a fundamental financial project for your future is to take professional advice.

 

Try our KNG Retirement Calculator

Our retirement fund calculator will give you esstimates based on the information you provide and will help you get an estimate of the capital you must accumulate in order to retire comfortably. (You can access it by clicking the button below)

Retirement Calculator

 

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Tip más básico para el retiro

Retirement in Latin America and worrying facts

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De acuerdo con una encuesta de Mercer el total de los 51 millones de mexicanos solo 1.1 millones se encuentran económicamente activos y cuentan con un plan para el retiro. Esto significa que de 639,248 empresas en México solo 1,625 ofrecen esa alternativa a sus empleados.

Entre más temprano empieces a ahorrar, la cantidad destinada mensualmente a tu fondo de retiro será menor y como resultado el “costo de demora” será menor. Ahorrar algo mensual a largo plazo en fondos de inversión nos permite aprovechar del poderoso crecimiento compuesto que te ayuda a aumentar tus ahorros.

Antes de analizar el monto que vamos a necesitar para nuestro retiro vale la pena echar un vistazo a estas estadísticas:

• De acuerdo con la Oficina de Censos de Estados Unidos, en EUA se encontró que durante 2016 de cada 100 personas que empezaron a trabajar a la edad de 25 años: el 1% serían ricos; el 4% tendrán suficiente capital para el retiro; el 3% seguirán trabajando; el 63% dependerán de la asistencia social, amigos, parientes o de la caridad; y finalmente el 29% estarán muertos. *

• En México el panorama no es muy diferente. De acuerdo con una encuesta de Mercer el total de los 51 millones de mexicanos solo 1.1 millones se encuentran económicamente activos y cuentan con un plan para el retiro. Esto significa que de 639,248 empresas en México solo 1,625 ofrecen esa alternativa a sus empleados. **

• De acuerdo con una encuesta realizada por la Asociación Mexicana de Afores (AMAFORE), señala que el 72% de los entrevistados no han hecho planes para el retiro laboral. Otro estudio de la misma institución muestra que solo el 9% de los entrevistados visualizan que ahorrar facilita un mejor futuro, y únicamente el 1% reconoce que el ahorro es necesario para tener una vida digna al dejar de laborar.

 

¿Cuánto necesitas ahorrar para tu retiro?

Para calcular el monto total que necesitas para tu independencia económica tienes que saber lo siguiente:
1. Especificar la edad a la que deseas retirarte
2. Establecer la cantidad de dinero con la que esperas vivir cada mes durante el retiro y cuál es tu esperanza de vida.
3. Considerar la inflación y cómo afectará el valor adquisitivo de tu dinero en el futuro.
4. Considerar donde vas a gastar ese dinero y otros factores que harían variar el mismo monto en el futuro.

Por ejemplo, el crecimiento de la esperanza de vida, no sabemos con exactitud hasta que edad vamos a vivir, la edad promedio cada vez es mayor gracias a los avances de la medicina. Si ahorras en pesos pero planeas viajar al extranjero y comprar productos o servicios del extranjero ¿que pasará con el valor adquisitivo de tus ahorros en el futuro?
Recuerda que el propósito de un buen plan de retiro es reemplazar tus ingresos del trabajo con un ingreso suficiente para mantener tu nivel de vida y poder disfrutar de tu independencia económica.

La siguiente tabla te indica una proyección de un ahorro de $500 USD mensuales durante 4 plazos de tiempo con el promedio del 7% anual de crecimiento en un portafolio balanceado de inversión global dependiendo del nivel de riesgo que elijas. También indica qué ingreso proyectado te podrá producir si retiras todo el crecimiento anual. Por supuesto puedes retirar el capital, pero para tener la tranquilidad de contar con ingresos de por vida, lo ideal es vivir con lo que te produce tu mismo patrimonio.

 

¿Quieres sobrevivir tu retiro o VIVIR tu retiro dignamente?

Tu primer paso es tomar una asesoría con un profesional. No dudes en comunicarte con nosotros para una asesoría completa en el área de planeación para el retiro o cómo cubrir los gastos fuertes de la universidad de tus hijos. Esta oferta no tiene ningún costo y sería el primer paso de iniciar un proyecto financiero fundamental para tu futuro financiero. Con 23 años de experiencia asesorando empresarios y ejecutivos en México y 14 años en Cancún con gusto te podemos atender.

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