Children's education: Do you think you are prepared?
Are you prepared for your child’s tertiary education? Do you know how much it cost now and how much it will cost when your kid turns 18?
Mums, we know how hard you are working to secure a good future for your kids. Needless to say, your kid’s education is one of your biggest worries. You take extra effort towards it, running behind the kid to take him to enrichment classes and extra tuition. The strain on the purse is tangible, but no one complains!
But did you know how fast the cost of education is going up?
Take the example of Mrs Ong. Sue’s daughter studied at a local university. When her daughter graduated in 2015, she had paid a total of SGD 32,000 on her education.
Mrs Goh, on the other hand, had a son in May 2012. Fast forward to the year 2030, her kid would have turned 18 years old and her family would be going through one of the most important decisions – which university to go to?
If we compare the cost of education today to something similar 15 years from now, you would be amazed! Here is a chart of tentative costs to the parents for university degrees.
As you see, a similar education would range from S$49,000 locally to S$ 550,000 in Australia in 2030.
Today, most of our kids go to local universities. There are also many who have top scores and wish to seek a degree from overseas prestigious institutions for the extra edge. As all parents are, you wish your child can develop his/her full potential and grant them the wish of studying at any university that they want.
But here comes the question – will your savings be sufficient for their graduate course? Can your savings cover their living expenses if they choose to study overseas?
We understand that the cost of education per child can be rather hefty, so you might have already started a savings account for them. The problem here is that your money will not be growing as fast as it should if you lock it up in a savings account.
Here are some ways to grow your child’s education provisions
- Managed funds
- Term deposits
- Investment bonds
- Education Endowment Plans
What are these funds and why should you know about them?
1# Managed funds
When you invest in a managed fund, your money is pooled with other investors to purchase shares of various companies. A Fund Manager buys and sells the shares to try to maximise your returns. Over a period of time, Managed funds may give good returns, but the volatility of the market impacts the returns.
2# Term deposits
When you keep your money with a financial institution, like a bank, for a fixed duration, it is known as a term deposit. The interest rate is usually fixed at the onset and is one of the safer investments.
3# Investment bonds
This again, is a safe investment. However, like all other safe investments, the returns are on the lower side. Investment bonds are backed by the Singapore Government, and a rate is announced for the 10-year duration of the bond.
4# Education Endowment Plans
Banks and other financial institutions help parents plan for the education of the kids. These plans, often termed as endowment plans, park your money in a safe way but give you better returns. Parents are encouraged to invest a fixed amount every month and the money is accessible at the time of payouts. These are dedicated towards education, and every parent must take advantage of them.
Saving for children's education: How do you plan your investment?
Mums, we understand that you are overwhelmed with the present. All this information about investment is numbing. But think about the larger picture. The easiest investments are not going to be sufficient for your kid’s dreams. So here is what you do to save effectively
- Talk to a financial expert
- Understand what a portfolio is. It is a mix of risky and safe investments optimised to give you good returns
- Pick up brochures of the educational plans you see. Understand what you would be paying and what would be getting and when
- Understand this concept clearly: One dollar today is worth more than one dollar tomorrow! Your dollar loses value if it does not grow.
In addition, you can get cash reward starting from S$400 when you sign-up for POSB's endowment plans. This is a great step towards planning your child’s education. Ultimately, the important thing is to have money whenever you need for your child’s education. Save wisely and see your kids achieve their dreams!