The Syed Family

Mr. Syed had recently called Raza and talked about how one of his neighbors was making good money investing in Pakistan Stock Exchange. He was wondering if this could be a good avenue of investment for accumulating his childrens education fund. Raza then met Mr. and Mrs. Syed, both government employees, whose major concern was to provide quality education to their 3 kids, aged seven, five and two. With the rising trend of private sector education systems, the couple was concerned about the immense costs attached with quality. Raza and Mr. and Mrs. Syed concluded that they should consider private schools for A-levels before they choose a suitable private university. Generally they expected their kids to start A-levels at the age of 16, followed by four years of university for an undergraduate degree. After doing a survey of schools in their vicinity, and calculating an annual increase of around 5% in fees, they estimated that A-levels expenses for their two older kids would be PKR 500,000 per year, and 4 years of university would cost PKR 1,000,000 per year; whereas for the youngest child, the costs would be 10% higher. Mr. and Mrs. Syed knew that with their limited source of income, they would need to initiate a savings plan very soon. They intended to accumulate enough funds by the time the eldest child started A-levels. Raza began contemplating whether Mr. and Mrs. Syed should enter into a savings plan for 8 years for all 3 kids together, or a staggered plan for each child. A staggered plan would involve starting investments and accumulating funds for each child separately. Such plans can reduce the burden of cash outflows in the early years but would continue for a longer term until the needs for the youngest kids education started. Raza had talked to a bank about their saving plans and they had offered an interest rate of 8% on savings plans specifically designed for such purposes.