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Children University Education

>> Wednesday, October 7, 2009

Children's Day just past and it serves as a timely reminder to parents to review plans for their children's university education funding.

With the economic crisis into its first year, has it affected the savings/investment targets for this crucial funding?

Parents should take the time to evaluate where their investments status and their risk appetites based on the remaining time horizon to their children's education.

For parents who have yet to start planning and for new parents, a few things you should consider:

  • Where do you intend to send your child for tertiary education? i.e. local or overseas.
    • Local tertiary education tuition fees are considerably lower. In addition, one does not have to incur expenses such as paying for lodgings and return flights home.
  • What is the course of study? The cost varies depending on the course of study.
  • When will they start their tertiary education? i.e. Boys about 21 and girls about 19 years old.
There are also other areas of concern to look into:
  • Savings towards your child's future education and retirement funding goes hand in hand. To set aside more towards your child's education may mean deferring your retirement plans later.
  • For insurance endowment plans, the projected maturity values are non guaranteed and may have changed. You will need to review if it still can achieve the the intended targets.
  • For unit trust investment plans, you should consider a regular savings plan to help smooth out the volatility. And to switch into more stable funds when the education needs are less than 5 years away.
  • For overseas education, parents should monitor the exchange rate between Singapore and the country where you intend to send your child for studies and look out for opportunities to build up their funds in the foreign country's currency.
  • Study loans are available from Central Provident Fund Board, universities as well as some banks.
  • Bursaries are grants for financially needy students, and the amounts range from $750 to $6,000.
In conclusion, it is important to start education planning as early as possible so as to enjoy compound returns. The earlier you start, the less you need to set aside monthly.


la papillion October 8, 2009 at 9:58 AM  

Hi there,

How much do you think a typical parent needs to save up for his kid (assuming daugther for worst case scenario) who needs the money 19 years later for local university (NUS/NTU)?

Lau October 9, 2009 at 6:50 PM  

A typical NUS/NTU course today cost about $6,500 - $7,000 a year.

With an average tuition fee inflation rate of 4%, 19 years later, the course fees will be about $13,700 - $14,800.
(Assuming the government tuition grant increases proportionally as well)

So, a 3 year course would cost about $42k and a 4 year course $56k.

This is not including the various miscellaneous fees like registration fees, exam fees, society fees, facilities fees, lab fees). In addition, there will be other things to take care of as well like hostel charges, transport, meals, computer, books, notes, etc.

19 years for daughter may not be the worst case as the additional 2 years for boys may see an inflation of the fees. And the parent would also have 2 more years to save and enjoy the compounding of their earlier savings.

la papillion October 10, 2009 at 11:53 PM  


Thanks for your reply. The fees for local uni is locked when you are accepted by them, so it will not increase, provided the kid got accepted at age 19 (same as for daughter). At least that's what I understand in the past.

My calculation for Uni is around 50k. Plus another 40k for pocket money. Is 100k good? What do you think?

Just want to see how you think about this :)

Lau October 11, 2009 at 9:23 AM  

Yes, if the boy secures a place before NS, the fee is fixed at the cost at that year.

Pocket money will depend on your expectation of your child's lifestyle. (i.e. how much you want to spoil your child)

For an average of $600/month allowance in today's value, that will work out to be $12,600/year at an inflation rate of 3% for 19 years.

So, a 3 year course would require about $38k and a 4 year course about $50k in living allowance.

A target of $100k would provide a close to minimum requirement with little buffer for any sudden spike in inflation or a more comfortable lifestyle.

Well, there are other ways to overcome the shortfall if it becomes necessary. Apart from those I mentioned in the article, you can require he/she to control expenses like not staying in hall, borrowing library books instead of buying and have home cooked meals; Or give some tuition and work during the school holidays. (It helps instills in them a sense of responsibility towards their personal finances and to learn the value of money.)

la papillion October 11, 2009 at 9:47 PM  

Thanks for your comments :)



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