It’s no secret that Singaporeans are willing to spend big bucks on their children’s education—just ask the private tutors in the $1 billion tuition industry who laugh their way to the bank every month.
So when a recent HSBC survey showed that Singaporeans spend an average of $21,000 per year on their children’s university education, it really wasn’t that surprising. After all, even a local university education isn’t cheap.
The disturbing part is that 52% were wiling to go into debt over it, and 55% thought that funding their children’s education was more important than paying their own bills or saving for retirement.
If you’ve got high hopes for Junior and will stop at nothing to make sure he gets into medical school or grows up to become a hotshot banker, make sure you do the following.
1. Start saving and investing for your kid’s education way in advance
While the survey showed Singaporean parents’ willingness to shoulder the cost of their kids’ education, it also revealed that they were not planning well enough.
71% of Singaporean parents fund their children’s education using their day-to-day incomes, which shows that most people are not actually putting aside money for it. If something happens to your income, such as you or your spouse getting retrenched, that basically means that you’re going to end up in debt over Junior’s university education.
If you’re going to have big ambitions for your kids, it’s only fair that you start planning ahead of time and putting aside the cash to finance it.
If you start saving and investing for your kid’s education from the moment he or she is born, by the time he or she hits university-going age at 19 to 21, you’ll have a decent amount available, and will be able to channel the rest of your money into retirement.
2. Plan for your kids’ education in tandem with your own retirement plans
Many parents think it’s just not possible to pay for their kids’ education AND plan for retirement at the same time, so they choose to sacrifice retirement. But that’s really not true.
What is impossible is paying for your kids’ education while still upkeeping a lavish lifestyle, keeping your car and taking those family holidays to Europe, and still having enough for retirement. Maybe that’s why so many parents don’t want to plan in advance for their kids’ education, since that would entail giving up many of the luxuries they are determined to enjoy.
Ideally, saving and investing for your kids’ education should go hand in hand with your own retirement planning. It is only when you look at the gravity of these two huge costs that you can make appropriate adjustments to your lifestyle to make sure you can achieve these twin goals.
That might mean giving up that family ski trip to New Zealand or sending your kids packing when they beg for an iPhone. But the alternative is to have to rely on the kids for handouts when you reach retirement age.
3. Involve your kid in planning for his education
The survey seems to suggest that many Singaporean parents try to micro manage their kids’ lives and pick out a career path for them without seeking their thoughts.
77% of the parents surveyed already had a particular career path in mind for their child, with 14% hoping their kid would study medicine, 10% finance and 8% engineering. Uh, it’s pretty obvious that 14% of the population are not going to become doctors or work in the medical field, so it’s clear there are some communication breakdowns or unmet expectations here.
Once your kid is old enough, please don’t go all authoritarian on him. Involve him in planning for his education and you’ll not only be able to get a better idea of the kinds of costs you’ll have to bear when he’s of age, but will also be giving him some much-needed self-awareness and career guidance, which many youths lack.
For instance, if your kid is hoping to go into applied healthcare, you want to be aware that many of the pathways in areas like physiotherapy or speech therapy will require him to obtain an overseas degree. You will also be able to discuss more affordable options, such as by having your kid obtain a poly diploma in order to shorten his university studies.
Not communicating with your child can result in situations like your 18-year-old daughter suddenly telling you she wants to get a UK degree in ancient civilisations.
4. See if there are other financing options for your child
If you really don’t have the cash to finance your kid’s education, don’t start swiping your credit cards every time the university sends you the bill for the next semester.
Before enrolling, you want to explore all financing options, including scholarships and loans your child can take out. That way, if you’re unable to foot the entire bill, you can shift some of the burden to your child when he graduates.
For kids who will be enrolling in local tertiary institutions, there is the option of participating in the CPF Education Scheme, which enables their parents to pay for their fees using their own CPF funds, which will then be reimbursed when the student finally graduates.
Those studying in private institutions or going abroad also have the option of taking out a study loan, which should enable them to get at the money while paying relatively low interest. Check out MoneySmart’s educational loan wizard to compare loans and get an idea of how much such a loan will cost.
While it’s tempting to want to do everything for your child, it’s important to remember that providing for aged parents while coping with rising costs is extremely stressful for young working Singaporeans. By being responsible with your own finances and making sure you do not overstretch yourself when paying for your child’s education, you could actually be doing the kid a favour.
Do you plan to pay for your children’s university education? Tell us why or why not in the comments!