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Saving For Your Child’s Higher Education

Tuesday, 11.09.2018

Our natural, nurturing instinct as parents is to provide the best for our children – and education isn’t an exception to that! However, this is Singapore, and education has such a great emphasis placed on it that its costs are always on a rising trend. 

Our focus points for our child’s education are: 1) to get into a good university, 2) studying a reputable course that they’re interested in, as that will (hopefully) 3) secure them a good enough future. And we’re definitely alright with shelling out the money that’ll pave the way to a good education.

The thing is, university fees in Singapore are a cool five-figure sum annually, which could be offset by taking out a CPF tuition loan – but only for local unis! For our kids who’re studying in a private uni, we’ll be bearing the full brunt of the course fees, upfront. 

(Credit: The Straits Times) University fees in Singapore are a cool five-figure sum annually, which could be offset by taking out a CPF tuition loan – but only for local unis!

Scholarships and bank loans are some other available options; though scholarships (both private and government) are only given out to a select few, and bank loans are akin to our children entering the workforce with a heavy load of debt on their back. 

Another option is for them to seek employment with a company that’s known to provide employment bonds – the company will pay for your child’s further education, but they’ll have to stay on for a certain number of years with the company (it’s 4 to 12 years on average). Breaking the bond will usually result in heavy monetary penalties for your child.

So how can we make sure we’ve saved enough for our child’s university education? 

START PLANNING EARLY!


You’ll see this suggestion plastered on pretty much every article with a similar topic to this. It really can’t be stressed enough. You might be wondering why you need to even think about something that’ll happen in 10 to 20 years from now, but let me ask you this: do you remember how much cheaper it was 20 years ago to study in a university? 

MoneySmart has a very useful guide that compares the university fees for local and private unis over here: https://blog.moneysmart.sg/education/singapore-university-education-cost/ 

After you’re done planning (talk to a financial advisor or wealth planning manager if you need to), work the figure into your budget. Saving or investing over a long period of time is so much less stressful than the alternative – scrambling about trying to scrounge up that spare $30,000 lying around.

You might have to make some sacrifices in the short term, but your future self will be thanking you for making those sacrifices. The sooner you start planning and saving, the more breathing room you’ll have when (no if’s) you need to make adjustments to your child’s university fund.

Take stock of your current funds, and the projected value of them


As part of planning, you’ll need to check how much money you currently have in the bank, savings policies, life insurance policies, and other investments. Then estimate their value when your child turns 18 or 21. 

Estimation of the projected value is easier said than done, as you’ll need to do some research on the trends of inflation, and speak with your insurers about all your policies current guaranteed projected value – monitoring and assumptions have to be made on a regular basis in order to keep up to date with the value of your investment portfolio.

Investing funds usually results in better long-term returns


If you haven’t done so already, instead of putting all your money in a savings account, consider investing a portion of your savings in areas that have a higher return of investment (ROI) than the interest rates in banks. 

However, don’t put ALL your savings into investments – it’s a recipe for disaster if an emergency crops up and you’ll need cash immediately on hand.

What you want to do is to maximise what your money can do for you, up until your child is ready for university. Consider moderate-risk investment options (preference shares, mutual funds, funds, etc.) but ALWAYS do proper research on any investment option that you’re looking at.

I’ll repeat it again – ALWAYS do research, and make sure you fully understand what you’re buying and investing in; never invest in something you don’t fully understand. If an investment option sounds much too complicated, you shouldn’t invest in it.

Pay off your debts BEFORE investing


Credit card debts or high interest loans should be settled before you invest your money. There’s almost no way that returns on your investments will outstrip the interest rates on your debt (credit card interest is around 20-26%, and if you’ve got a medium-risk investment that provides the same amount of returns, do let us know!); not only that, the money that you invest will usually be locked in for a period of time, which means you’re down by that amount of cash for the foreseeable future.

 

Friendly Financial Advice
If you need help with financial planning, consider speaking with a specialist from JLOrganisation. Drop a text or call to 9689 2044 to make an appointment with their friendly and knowledgeable specialist today.

 

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