Planning your child's future

While few can deny the arrival of baby brings its own rewards to parenthood, raising a child is a costly affair. Sure, your spending may start off as innocently as baby formulae and diapers, but if you’re hoping your child will get a higher education someday, get ready for a shock. When you take everything into consideration, the total cost for a diploma or degree could be terrifying.

The costs of financing an education have been rising in recent years and the trend is expected to continue. It’s not surprising that many of today’s students need help in covering their expenses. The ideal time to start planning for your child’s education is when he or she is born. If you haven’t started saving, now is a good time to begin!

Assess your child’s inclinations

But many do not realise that financial planning for a young, married couple is probably one of the most important steps to take in setting their financial foundation on the right path. When children come along, it is even more important to sit down and discuss how money should be spent, invested, or saved.

Before considering the costs of education, you first need to decide which school and course your child is most suited for. Your child may be too young to decide where his or her best interests, goals, dream and abilities lie. As a parent, you will need to consider your child’s skills, competencies and weaknesses with brutal honesty. By sitting down with your child and laying out what is best, you are ensuring that the money invested will be for the appropriate degree or course that will help develop your child to be all he or she can be in the future.

Costs of higher education

Below are some examples of how a degree can cost you today, and in the future.

When calculating the costs of education, the following expenses should be taken into consideration:

Tuition fees Books and supplies Student activity fees Personal expenses Room and board (if staying in hostel, or abroad) Transportation (if studying overseas) Insurance (if studying overseas)

The amount of savings required is directly influenced by the following factors:

Current costs and tuition fees Expected rate of increase in costs Number of years between now and when the child enters university Expected contributions from your child’s earnings and savings Current value of investments earmarked for education purposes Possible inheritances or gifts Expected after-tax rate of return on investments

A simple example

Here is an example of the costs involved. If your child wants to go to university in 10 or 15 years' time, the table below shows how much it could cost.

Location	Singapore	Australia	U.S.		U.K.
Length of Course	4yrs	3yrs	4yrs Private-U	4yrs State-U	3yrs
Today	S$39,208	S$82,914	S$314,140	S$231,140	S$174,141
10 years' time	S$48,800	S$126,664	S$385,340	S$284,653	S$244,338
15 years' time	S$54,501	S$155,279	S$425,337	S$314,493	S$ 289,757

Information is taken from OCBC WealthMap™ and only applies to non-medical courses.

An Australian university education in 10 years' time could cost S$126,664. To be able to afford it when the time comes, you would have to save a lump sum of S$77,761* or start monthly savings of S$812* today. (* Based on a 5% p.a. rate of return.)

So how do you finance your child’s education?

Start planning early… You may have heard the saying the best time to plant a tree is 20 years ago; the second best time is today. The same is true for saving to finance your child’s education. It is never too late to start, but the earlier you begin, the harder your money can work for you to help you reach your financial goals.

The importance of starting early

In most cases, the type of investments you choose will be determined by the number of years you have before your child enters university. The more time you have to invest, the more risk you should be able to accept. Starting early means you have more time to ride out the volatility of your investments. It also means that you contribute less but your money works harder and longer for you.

All investment products encourage you to save as much as you can and start as early as you can. One basic way to save for your child’s education is to put your money in a regular bank savings or fixed deposit account. But in a low risk interest rates environment, it would not be enough, given that education costs are expected to rise about 5% every year. Besides, a regular, consistent, monthly savings plan needs a lot of discipline over a long period of time.

Another way is to take up a loan with your CPF savings. The CPF Education Scheme was implemented on 1 June 1989 to help the lower-income families finance their own or their children’s local tertiary education. The main purpose of the CPF Education Scheme is to allow the temporary use of the savings for education. As your CPF Savings are meant to provide for your old age needs, the loan needs to be repaid in full plus interest. Although the CPF Education Scheme seems like light at the end of the tunnel for families to help pay for their children’s education, it also means that your child is saddled with a loan even before he or she graduates.

Savings options

These days, there are several funding tools available that enable you to save for your child’s education, accumulate returns and enjoy the benefits of insurance at the same time. Gone are the days where putting your money in a bank deposit or taking up a loan is the best option.

The more common of these savings options are:

Endowment Plans Unit Trusts Regular Savings Plan

Many concerned parents start worrying about paying for their child’s higher education almost immediately after the child is born. But no matter how old your child is, it’s never too soon to begin planning for his or her education. Getting into the habit of investing early can help you prepare for your child’s education and allow you to enjoy the financial freedom that comes when you have money set aside. While financing your child’s college education may be one of the most daunting financial obligations you are likely to face, with some forethought and planning, it is not out of reach.

There is no official ranking which places institutions/course in a league order. This is because the content of one course will often vary from another. Different institutions have different approaches – some are applied and vocational, others are more theoretical and more academically inclined; some regard their strength as teaching other see their strength as research.

There are so many things to be considered when applying to a college or university that you may want to speak to an education advisor. There are advising centres in Singapore for education in Australia, United States, and United Kingdom. That is where you can receive full information on the various schools of interest to you and your child.

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