Many parents will agree that one of their most defining moments in life occurred at the birth of their child. A child is a blessing from above and he/she is seen as a ‘continuation’ of ourselves when we depart from planet Earth. As such, many parents would want to have a glorious ‘continuation’, by planning for their children from the school they must attend to even making it a personal goal to buy a house for their children. It is also no wonder that many parents would purchase education savings or investment plans in order to save up for the hefty university fees for their children in future. However, there are “must-knows” factors to consider first before we embark on education fund planning for our children.
1) Is children education planning necessary?
The cliché goes: if you fail to plan, you plan to fail. This is as true for retirement planning as it is for children education planning simply because a pool of cash does not magically appear on its own when you need it (yes, Aladdin is a fairy tale). A plan to delay gratification by saving up and investing wisely contributes to the fulfillment of any wealth accumulation goal. So yes, education planning is necessary and knowing that the education fee inflation rate in Singapore is about 5-6% per annum only make it even more pertinent to start education planning early.
2) When shall we start planning for children education?
The simple yet ‘difficult-to-swallow’ answer for many parents out there is: after you have planned for your own retirement nest.
Before a plane ride, we will watch an air safety video or the stewardess explaining that in the event of the oxygen mask popping out of the console due to a low oxygen environment, be sure to fix the mask on yourself as a parent first before fixing masks onto your children. Why? Because only when you can survive first, then you are physically abled to assist your children. Should you help your children with the mask first and you pass out after that, your children may not know how to save you, especially if they are too young. The concept is the same with retirement planning: only when you can survive on your own upon retirement, then you can allocate extra resources today to help plan for your child’s varsity funding.
I know the above point may not rest well with many parents who would have the ‘objection’ which is stated in point number 3 below.
3) “I must pay for my child’s university education so that he will be able to get a good job with a good income after graduation and without any school loan to repay, he can take care of me when I retire”
It is truly a beautiful picture painted here. I hate to break your heart but unfortunately, in a real and inflationary world we live in, things do not happen this way. Even when we have the most filial child in the world, he/she will also need to take care of themselves and their own off-springs. They will have to buy a house, pay for their own utility and phone bills, repay their own car and house renovation loan, go for their annual vacation with their spouse, send their kids for enrichment classes etc such that they may not have that much to spare for their grey-haired parents at home. It would be tragic both for the expectant parents and the filial children if both fail to meet mutual expectations in the area of children providing for parents’ retirement years.
The best gift a parent can give their children is not just about funding their varsity education. It is also the ability of us as parents being able to take care of our own finances as well as health and medical expense (through medical insurance) upon retirement, instead of putting extra financial strain on our children. As for university funding, the government currently allows us as Singaporeans or SPRs to lend monies from our Central Provident Fund Ordinary Account (CPF-OA) to our children to pay for their local university fees; if insufficient, our children can also source for a temporarily interest-free loan from a local bank and start repaying with interest after graduating.
In order for parents not to fetter their children financially in the future, let our ‘present self’ take care of our ‘future self’ first before looking into children education planning.
Insure yourself, protect others.
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The author of this article is Mr Sean Ong. He is a Certified Life Coach and a Chartered Financial Consultant with more than 14 years of experience in the finance industry. A shareholder with the one of the largest independently-owned financial advisory company in Singapore, Sean also leads a top financial advisory group and has been featured on the local TV and radio. In his efforts to contribute to the society, Sean ran 1,000km over 87 days to successfully raise more than $13,000 for a children charity in Year 2012. He also published a book called “Mend Your Socks!” where sales proceeds were donated to charity. Sean can be contacted at firstname.lastname@example.org.