Should I Invest My School Fees?

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Friday letters are usually dedicated to taking questions from our community. Do you have a question for us? Please feel free to send an e-mail to [email protected] or a DM to any of our social media channels.

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Question

Most currencies are appreciating against my local currency. Some of my friends have advised me to open a dollar account. But I’m wary of the account fees and charges. Please, what's the best thing to do? How do I save/invest in dollars??

Answer

Saving and investing in higher valued currencies is a smart move to guard your money from currency depreciation. Higher valued currencies are those that have shown steady improvement in value over time, such as the dollar, pound, euros e.t.c.

In order to guard your money from currency depreciation, there are two options available:

• Saving in a domiciliary account
• Investing in dollar denominated fixed income securities like bonds, treasury bills, e.t.c.

Saving in a domiciliary account most times comes at a cost, when considering fees and charges, however, some offer interest on your savings.

Fixed income securities are low-risk investments that could serve as an alternative to saving in a domiciliary account. Here, there are no account fees or charges. Fixed income securities are however also prone to interest rate risks. Interest rate risk occurs when rates rise above when you purchased your fixed income investment. When interest rates rise, fixed income investments are more profitable for new entrants. However, for someone who has invested before the rise in rates, he/she is in an unfavourable position. This is because his/her funds are fixed, and cannot be withdrawn to take advantage of the new rates.

For the fact that there are no fees or charges attached to fixed income investments, they are generally considered as a better alternative to saving in a domiciliary account. Therefore, in order to make the best decision, it is advisable that you make proper enquiries concerning the terms and conditions attached to your domiciliary account, and weigh it against purchasing dollar denominated fixed income investments.?

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Question

I have some funds stacked up for my Masters studies, and my school is set to resume during this fall semester (August). But the funds are not yet complete. A friend suggested that I invest the money so it can grow between now and July when I need it. What’s your advice please?

Answer?

It is never advisable to invest in the short term. This is because investments could be risky. And, to generate sizeable returns, one needs to be patient. Even low-risk investments like HYSA and fixed-income securities need time to grow. A minimum of one year is required to see sizable returns on your investment.

There are however a few options you could consider so you don’t miss out on your study plans:

• You could consider deferring your admission till a further date if possible.
• You could consider searching for a job/graduate assistant role to enable you to fund your fees.
• You could consider taking a loan. Please ensure that you pay close attention to the terms and conditions of the loan (like interest rate, repayment period). Also ensure to draft up a repayment strategy, before taking a loan.

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