How Planning For Your Child’s Education Help You Retire Better

There’s a lot to think about when you and your partner are deciding whether or not to have a child – how to bring up the child, potential career changes, education, and so on. However, financial concerns often play a huge role when couples decide to start a family.
In a 2019 viral infographic by SmartParents, they estimated that supporting a child until they finish their university education would cost “at least S$670,000”. If you have more than one child, you would need to set aside a minimum of S$1.34 million! School fees for Singaporeans are heavily subsidised till the child reaches tertiary education, and that’s when the main bulk of education costs kick in. While it may seem a little far-fetched to be talking about a university education when your child can perhaps barely speak, it is absolutely essential to plan for your child’s education now. Trust me, you need all that time.

How Much Will Tertiary Education Cost?

There are a few factors that determine how much a tertiary education costs. Most undergraduate courses have a duration between three to four years, while courses such as Medicine can take up to five years to complete. In addition, the tuition fees in various institutions would vary.
The table below shows how much a local tertiary education would cost in the next 20 years, taking into account an inflation rate of 3%.
Table Breakdown of Tertiary Education Cost
Table View of Tertiary Cost Breakdown
However, the biggest factor in determining the cost of your child’s tertiary education would be whether he/she enrols in a local or overseas institution. It is significantly more expensive to enrol your child in an overseas institution as fees for international students are costlier. For example, the annual average tuition fee in the UK is about £20,000 for international students. Furthermore, you would have to factor in daily living expenses such as food and transport, as well as accommodation.
That said, pursuing an overseas education might be necessary, especially if your child wishes to enrol in courses that local institutions do not offer such as Veterinary and Archaeology.

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The Importance Of Child Education Planning

It’s clear that the cost of tertiary education is only going to rise. If your child’s education is not thoroughly planned, you risk your child being burdened with education loans when they enter the workforce – starting off with debt really isn’t the most pleasant feeling. Also, you might have to use your retirement funds to pay for your child’s education – not an ideal situation either.
To avoid such scenarios, it’s best to invest in a child education plan. In deciding which plan is best for you, consider your liquidity and flexibility of the plan. Ask yourself if the returns are significant. After all, the whole point of the plan is to increase your savings. In addition, you’d want to choose a plan where payouts are flexible. This means giving you the option to withdraw payouts at various stages of your child’s life. There are now plans which spread the maturity period payout over the years your child is in tertiary education, instead of giving you a lump sum at the end of the policy period. While you might not necessarily need the funds, you might wish to invest the payout amount to further grow your child’s tertiary education fund.
Also, take note of the premium term each plan offers. No one knows your financial situation better than you, and you’d want to make sure you are able to commit to paying the premiums.
It might be difficult to plan for something that far into the future, but our preferred advisors are here to provide their guidance. Leave your contact below and they’ll be in touch shortly!

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