Why and how a savings plan for kids can help shape your child's future
All you need to know about saving and starting early is right here...
Kids’ interests keep changing as they grow and discover more of the world. Depending on the activity that they have enjoyed recently, their answer to “what they want to become when they grow up” frequently changes.
Boys express their wish to become firemen, soldiers, and even super heroes when they grow up. And girls? You can bet on it that at one time or another, they would want to become ballerinas, princesses, and chefs.
Of course, there’s always the budding scientist who also wants to be a hip-hop dancer at night! We can’t really expect little kids to already know what they want to do as grown ups.
Our job as parents is to ensure that our children are free to explore their interests and strengths and that they can face the future fearlessly.
It is a given fact that as parents, we want to provide well for our children. From food to clothing to experiences, from infancy to adolescence and beyond, we put a lot of thought on the life that we give them.
Out of the collective goals that all parents have for their offspring, a college degree might just be the highest aspiration of all.
However, the idea of sending their kids – who are currently running around in diapers – to college is something that parents take for granted and is quite removed from their daily thoughts.
College is still a long way off after all… or is it?
More important information on having a savings plan for kids on the next page…
An alarming statistic of one in five parents are financially ill prepared and they foresee having to borrow money in order to pay for their children’s education – according to the HSBC Asian Insurance Monitor.1
Not having adequate funds can limit a child’s options when choosing a college, which may impact his/her future career.
College selection might just boil down to how much money the parents are willing to borrow and which colleges offer financial assistance. Forget the dream of getting an elite education.
Families don’t need to face such a grim prospect, though. With sound financial planning, we can ensure that our children have a fair chance of getting quality education in the future.
Why and how to start a savings plan for kids early?
1. Let time be your friend.
As the saying goes, money doesn’t grow in trees. We might be comfortable now, but our income might not catch up with how fast education cost is zooming up.
According to recent data, the amount that parents will need for their child’s education, especially abroad, can reach as high as US$100,000 per child.2
What to do: Let time be your friend. Sufficient funds can be accumulated with sufficient time.
Set aside regular and disciplined contributions in an education savings plan. Done over a long period of time (think from diapers to high school diploma), you can easily reach the approximate amount that you will need for your child’s college education.
2. Earn from your interest, not just your principal.
A tree is good, but an orchard is better. Have you ever heard of compound interest? It is simply the interest that is added to your investment, and together, they then earn interest.
It’s like choosing to grow and sell fruits and using the proceeds to plant more trees that will give you more fruits… and on and on and on.
Over time, your savings will grow exponentially, as you will not only earn interest on one tree, but on a whole orchard that grew from the fruits of one tree.
What to do: Leave the interest alone, and let your capital grow over time with the interest already earned. Letting your investments roll over and over will give you the snowball effect: it starts small then eventually becomes gigantic just by rolling about.
3. Be brave and invest through all seasons.
Growing money is really like growing trees, which may get beaten up by strong winds and rains but will eventually thrive again in sunshine.
Storms and periods of calm will always be part of investing, but enduring volatility may mean you will enjoy higher returns too.
What to do: Save and invest regularly, whether the market is on a roll or in a funk. This will ensure that your investment will even out in the long run.
When you buy a tree (sorry, we have to keep the analogy going here!) for SG$10 in one month, and for SG$20 in another month, guess how much you’ve paid for it in average?
Protect your child’s education, even when life doesn’t turn out the way you planned it.
An education savings and protection plan helps you do all three: earn through time, earn from your interest, and weather storms in the financial market.
By signing up for an education savings and protection plan early, you have a good chance of protecting your child’s education and future even if life doesn’t go as planned.
An education and protection plan can give you a sense of security, knowing that should anything happen to you, your child will be able to have a chance at receiving quality education in an institution of his/her choice.
Learn more about investing and personalizing your banking needs here:
HSBC Goal Planner — An intuitive tool that ensures your wealth portfolio is effectively serving your needs.
Overseas Education — Give your child a seamless transition wherever his educational journey takes him.
HSBC Premier Overseas Education — While picking your child’s tab, don’t forget to fit in their banking needs.
HSBC Advance — Supporting you in every way while never claiming to play a starring role in your success.
- HSBC Asian Insurance Monitor, January 2010, conducted by AC Nielsen for the HSBC Group from July to August 2010, asiainsurancereview.com
- HSBC Affluent Asian Tracker, June 2009
How do you save for your child’s future? Share your own savings plan for kids with us by leaving a comment below.