Ever stopped to think how much a university education for your child will cost you by the time he reaches 18? Follow this guide to get started on your child’s university savings now.
WORDS LOW LAI CHOW
For any parent, the financial pressures of child-raising can be tough to handle. From milk and diapers in the first years to hiring domestic help for caregiving in the later ones, the list may seem daunting and relentless.
One area worth paying extra attention to, however, is your kid’s future tertiary education. University fees, in particular, can work out to a sum that sets you back by quite a bit. No thanks to increasing operational costs and such, education trends show that tuition fees in local universities have been steadily rising every year. As forecast in a 2016 study by the Economist Intelligence Unit, a local four-year university degree programme is set to make up about 70.2 per cent of annual income here in Singapore by 2030.
Here’s an easy guide with tips to make it easy for you to think about what to do to start saving. Have that plan down pat today for your kid’s future education fund!
Do a Bit of Time Travelling — and a Reality Check
Assess how much a university education for your kid will cost by the time he or she comes of age in say, 15 years’ time. Do remember to also factor in inflation that will set in over these years. From there, you can go backwards and work out how much you have to save on a regular basis. Local university education is automatically subsidised by the government for full-time Singaporean undergraduate students (non-Singaporean students can also apply for the subsidy grant, though they are required to work for a Singapore entity for three years upon graduation if they are successful). For instance, the published annual tuition fees for National University Singapore this year range from S$8,150 to S$27,400 after subsidy, depending on the course of study. If you are considering signing your child up for an overseas university education, a bachelor’s degree course may well cost above the $100,000 mark — other expenses, such as accommodation and living expenses, will also have to be factored in.
Reflect on Your Current Lifestyle
If you’re fretting about the high cost of a university education, don’t panic. Action is the first step to conquering fear — and yes, there’s nothing better than a plan to get started on your action plan for saving for your child’s education. Examine your existing lifestyle closely to see where you can always shave off unwanted expenses with ease. A good way of doing this is to install a mobile or web application such as Toshl and monitor exactly where your money goes. Collect the data, then reserve the scrutiny for later. For instance, are you spending unnecessary money on a car when public transport is so readily accessible (and affordable) in Singapore? Also look into how to alleviate recurring high costs such as childcare; in the long run, it could be worth hiring a domestic helper or even look into flexible work arrangements. Instead of splurging on expensive vacations, can you take the family to a destination that is a lot more wallet-friendly?
Don’t overlook the small things,
such as loyalty rebates on the supermarkets you frequent for groceries.
These all add up. Live within your means —
and set aside a comfortable but substantial fixed amount every month.
Get Honest about Your Financial Situation
Take a cold hard look at your existing financial situation to see how you can provide for your child. How much savings do you currently have in your bank? How about the projected value of your life insurance policies when your child is of university-going age? What are the recurring payments you have to set aside every month, such as utility bills and mortgages? How about the family’s daily expenses and household expenses? Are you covered under CPF’s Dependants’ Protection Scheme? Don’t forget about your savings for retirement too — and emergency funds to counter against unexpected situations like losing your job. Investing funds in the Supplementary Retirement Scheme (SRS), which lets you save for retirement above and over your CPF savings with tax relief, may also be a way to benefit your family financially over the years. With the CPF Education Scheme, you can also consider using your savings in your Ordinary Account of up to 40 per cent or remaining balance (whichever is lower) to pay for your child’s education. There are cap limits, of course, and your kid has to repay the loan one year after graduation. But it’s an option.
Is Investment Right for You?
Explore your insurance options to eliminate or reduce the odds of having to fork out unpredictable costs such as medical bills that could eat into your child’s education fund. While you’re at it, also compare and consider looking into getting an endowment plan or a savings plan to save for say, 15 years. You can time it in such a way so that the payout on maturity can go towards your child’s education needs. Exercise prudence and look into the amounts of guaranteed cash values you will get back, as only part of the policy value is guaranteed and the actual amount you get back is dependent on the performance. Of course, there are other options such as bonds and unit trusts. Ask how much risk you can reasonably take on. Products with higher potential returns typically involve higher risks. Take it upon yourself to make informed choices, and from there, make it your best practice to review your portfolio regularly. That way, you know how you can work towards and attain your financial goal for sure; whether it be to consider more investments, or pumping in more savings closer to the date the funds will be needed.