Thursday, September 06, 2007
Funding for your Children’s Education
Every parent wants to provide the best for their children to help them realize their aspirations - and this undoubtedly will include providing for the best education. However, quality education often does not come cheap and the cost of education continues to increase rapidly each year.
When the freeze on tuition fees was lifted in 2006 as part of the government’s plan to grant greater autonomy to the local tertiary institutions in setting fee structures, tuition fees at the five polytechnics went up by 8%, NUS and NTU both raised the fees of non-medical courses by 5% while the SMU increased its fee by 15%.
According to the National University of Singapore (NUS), the tuition fee for Academic Year 2006/07 is S$6,110 p.a. for the non-Medical courses and S$17,520 p.a. for medical courses. If we are to factor in the inflation rate for the number of years till your child goes to university, the cost can be quite astounding. A projected inflation rate of 5% will mean that in 19 years time, the tuition fee alone is going to be $15,440 p.a.
Overseas tertiary education will cost even more. For example, the U.S. College Board reported that the average 20005/06 tuition fee was US$21,235. All the above mentioned figures have not yet taken into account the living expenses which would also increase over the years as the cost of living continue to rise.
Education is being heavily subsidized by the government currently. However the government has planned to reduce the amount of subsidy given. There are numerous assistance schemes available to help fund for tertiary education and one of the most widely subscribed is the CPF Education Scheme. Under this scheme, CPF members can pay for their own or their children’s full-time local tertiary education at approved institutions by utilizing up to 40% of the Ordinary Account balance which includes amounts withdrawn for education and investments. There are also other schemes such as study loans from commercial banks, bursaries and scholarships from both public and private sectors.
However, with the rising costs of living and education, your CPF or other assistance schemes may not be sufficient to provide for all of your children's education needs, especially when your CPF is also to be used to fund your retirement. Therefore, you will need to start planning for your child’s education as early as possible. The first thing to do is to establish how much is actually required. Next is to consider how much time you have to save for the amount required so as to determine the amount that you need to set aside now. The less time you have, the larger the amount you must put away each month. Hence it definitely pays to plan well ahead, especially if you have more than one child.
Here are some possible strategies ways in which you can fund your children's tertiary education:
Monthly Investment Plan
A fixed amount of money will be invested into unit trust on a monthly basis. Such a plan aims to leverage on the Dollar Cost Averaging effect. By investing fixed amounts at regular intervals, you are buying more units when the price is low & fewer units when the price is high, allowing you to reduce your average cost (versus average price) in a volatile market. There are as many as 300 unit trusts for you to choose from, depending on your investment horizon, goal and risk appetite.
Investment-linked Policy
This is a regular-premium investment-linked plan which life protection with investment opportunities. Typically, such a plan will offer you the control and flexibility to vary the allocation of your premium protection or investment at different points in your life to match your life needs.
Endowment Policy
A long term regular-premium endowment plan will help you to save in a systematic and disciplined way for your children’s education. It also offers insurance protection as well as other payer’s benefits to ensure that even in the event of death, critical illness or permanent disability of the payer (typically the parents), the child will still receive the funds required for his/her education.
The cost of university education looks set to increase further. Save/Invest early to avoid a situation where you cannot afford to pay for a course that your child qualifies for. By planning well ahead, you can try to ensure that your children will be educated in the areas that they desire and have opportunities to pursue the careers in their chosen fields.
When the freeze on tuition fees was lifted in 2006 as part of the government’s plan to grant greater autonomy to the local tertiary institutions in setting fee structures, tuition fees at the five polytechnics went up by 8%, NUS and NTU both raised the fees of non-medical courses by 5% while the SMU increased its fee by 15%.
According to the National University of Singapore (NUS), the tuition fee for Academic Year 2006/07 is S$6,110 p.a. for the non-Medical courses and S$17,520 p.a. for medical courses. If we are to factor in the inflation rate for the number of years till your child goes to university, the cost can be quite astounding. A projected inflation rate of 5% will mean that in 19 years time, the tuition fee alone is going to be $15,440 p.a.
Overseas tertiary education will cost even more. For example, the U.S. College Board reported that the average 20005/06 tuition fee was US$21,235. All the above mentioned figures have not yet taken into account the living expenses which would also increase over the years as the cost of living continue to rise.
Education is being heavily subsidized by the government currently. However the government has planned to reduce the amount of subsidy given. There are numerous assistance schemes available to help fund for tertiary education and one of the most widely subscribed is the CPF Education Scheme. Under this scheme, CPF members can pay for their own or their children’s full-time local tertiary education at approved institutions by utilizing up to 40% of the Ordinary Account balance which includes amounts withdrawn for education and investments. There are also other schemes such as study loans from commercial banks, bursaries and scholarships from both public and private sectors.
However, with the rising costs of living and education, your CPF or other assistance schemes may not be sufficient to provide for all of your children's education needs, especially when your CPF is also to be used to fund your retirement. Therefore, you will need to start planning for your child’s education as early as possible. The first thing to do is to establish how much is actually required. Next is to consider how much time you have to save for the amount required so as to determine the amount that you need to set aside now. The less time you have, the larger the amount you must put away each month. Hence it definitely pays to plan well ahead, especially if you have more than one child.
Here are some possible strategies ways in which you can fund your children's tertiary education:
Monthly Investment Plan
A fixed amount of money will be invested into unit trust on a monthly basis. Such a plan aims to leverage on the Dollar Cost Averaging effect. By investing fixed amounts at regular intervals, you are buying more units when the price is low & fewer units when the price is high, allowing you to reduce your average cost (versus average price) in a volatile market. There are as many as 300 unit trusts for you to choose from, depending on your investment horizon, goal and risk appetite.
Investment-linked Policy
This is a regular-premium investment-linked plan which life protection with investment opportunities. Typically, such a plan will offer you the control and flexibility to vary the allocation of your premium protection or investment at different points in your life to match your life needs.
Endowment Policy
A long term regular-premium endowment plan will help you to save in a systematic and disciplined way for your children’s education. It also offers insurance protection as well as other payer’s benefits to ensure that even in the event of death, critical illness or permanent disability of the payer (typically the parents), the child will still receive the funds required for his/her education.
The cost of university education looks set to increase further. Save/Invest early to avoid a situation where you cannot afford to pay for a course that your child qualifies for. By planning well ahead, you can try to ensure that your children will be educated in the areas that they desire and have opportunities to pursue the careers in their chosen fields.
