Education is (and will always be) the best gift that you can give to your child. As the saying goes, education is the key to success!
Access to quality education is what leads children to a successful and comfortable life in the future. Without it, navigating the real world will be more challenging.
While it’s every parent’s dream to send their kids to great prep schools and universities, saving up for a child’s education doesn’t get easier due to the rising cost of living and education.
In Singapore, parents spend an average of $60,000 to $84,000 for three years of tertiary education, which is an overwhelming amount of money.
You can only expect that these numbers will go up as years go by.
With these in mind, you may be wondering how you’re going to be able to afford to provide your child with a good education as an average salary earner.
For today’s article, we’ll share some tips on how parents can plan and save up for their children’s education. We’ll also cover the importance of financial planning and education planning for parents.
1. Look into the costs of education
Before planning, you need to have an idea of how much it’s going to cost to send your child to school.
Start by looking at the actual cost of education in Singapore (or overseas if you want your child to have an international education).
To get an estimate of the total costs, calculate the number of years until your child reaches university age and then add the yearly inflation rate to the current tuition fees.
Remember: what your child decides to study in college will affect the total costs too, as some majors tend to be more expensive. For example, science courses are generally more expensive than other majors.
2. Make lifestyle changes
There’s a massive difference between your lifestyle as a single person and your lifestyle as a married person with a kid.
To make way for a children’s education fund, you’ll have to review your current spending habits and cut down on unnecessary expenses. That means the new iPhone model will have to wait!
Discuss this matter with your partner to get a better perspective on how you can change your lifestyle to be financially prepared for your child’s future.
We’re not saying to deprive yourself of things, but rather to set your priorities straight and not lose sight of them. It wouldn’t hurt to treat your spouse to a fancy dinner now and then!
3. Get an endowment plan
Let’s be honest: you and your spouse’s monthly salary may not be enough to finance your child’s entire education.
In this case, it’ll be a wise decision for parents to sign up for an endowment plan as another form of your child’s education plan. It protects your savings while making them grow through higher interest rates (higher than what a savings account of any tier can offer).
Another attractive feature of endowment plans is insurance coverage. They’re basically an insurance policy that doubles as a savings or investment account.
Give it a few years and your total savings will accrue to a lump sum that can be claimed when it’s time to send your child to university. You can claim it for other emergencies too, so it’s a flexible backup plan.
4. Learn how to invest
Another way to make sure you’ll have something for your child’s education in the future? Investments!
When you’re living off your savings, the rising inflation rates diminish your purchasing power, but investments can help you beat those in the long run.
There are different forms of investment products in the market that can help grow your assets. These include stocks, bonds, ETFs, REITs, trusts, and equities, among others.
Investment is a complicated world that comes with lots of risks, so it’s best to do your research first, or consult with a financial advisor to receive unbiased advice based on your long-term goals.
5. Do a time analysis
Timeline analysis refers to the time when you’d need your savings for your child’s education, or even retirement expenses.
Generally, it’s better to go with a savings or endowment plan that matures in 15 to 20 years.
If your child is 3 years old today, then a savings or endowment plan with a maturity period of 15 years would be perfect as they’d be aged 18 by then (which is the usual age of tertiary students in Singapore).
It’s important to consider the maturity period when education planning as it allows you to use your savings right when you actually need them
However, there may be emergencies along the way where you may need the money earlier than expected, so a flexible maturity period is something worth considering.
Securing your child’s future through education planning
It’s worth noting that there’s no singular or “more correct” way to save for your child’s future education.
You’re free to opt to invest your money as early as now or get an education loan in the future. At the end of the day, what matters is that you pick the best option that works for your current situation, without putting a burden on your future.
If you want to learn more about education planning, or simply want financial planning advice, don’t hesitate to reach out! We can connect you with experienced financial advisors who can help you reach your goals!