Tan Kin Lian's Blog: Save for child's education

Monday, December 24, 2007

Save for child's education

Dear Mr. Tan,

I have read comments from many people in your blog. Some people recommended that parents should save for their child's tertiary education. An education is the best gift for your child. Other people said that the priority is for one's own retirement needs. What are your views?

REPLY

The first priority is to have adequate savings for your own retirement needs. You need $200,000 to $400,000 at age 65 to retire comfortably. Do you have this sum?

If you have more than adequate savings, you can set aside the excess savings for your child's tertiary education. The saving can be made in your own account. You can decide on the amount to be set aside for your child's education when the time comes..

You should do a cost benefit analysis for the education expenses. How much are you spending? What additional income can your child earn from the overseas education? What is the payback period? Are there other options to get a more affordable education?

I usually recommend students to study in university in Singapore, as it is highly subsidised. A student can study in an overseas university, if you are on scholarship. Do not spend half of your retirement savings on your child's education. It is not wise.

8 comments:

Anonymous said...: A gift to your child is not a need but a want.If you haven't met all your needs you shouldn't be giving away any thing. Prioritize!!!!What good is an education funding plan if something goes wrong with the bread winner and if you haven't got your own plan in place. Don't put your cart(your wants) in front of your horses(your needs)Your retirement ranks higher than your child education needs.
Insurance agents exploit your love, your emotion not becuase they love you or care for you but they know that this is an effective way to get you to buy a policy from them.You see their modus operandi? This is called emotional selling.They use words like "your best gift to your child".This tugs at your heart's string and you'll sure to yield.And you will say,"ya,lor".Planning uses more head than heart.
Check out Dr. Money website to find out more about the clever means insurance agents use to get to your heart.Financial planning is about needs, about common sense, about priority, about plans and not about emotion.
Like Mr. Tan said your child's education funding can be planned together with your retirement need. This is balanced and not skewed; this is financial planning.; December 23, 2007 11:12 PM
Thomas Phua's Blog said...: I hope my children can make it to Singapore University, otherwise, it will be tough to support them oversea.

Looking at SMU, the fee is about $8700 per year and if it is for 4 years, the total will be $34,800.

Do not forget the fee adjustment yearly and one can set the inflation at 6% for the fee.

So in 20 years' time, the fee can go up get a bit.

Children's University fee need to be saved.

Do not forget about the Notebook Computer that is needed from year 1which can set us back another $2000to $3000.

Even with local university, one should be prepared for at least $50,000.

How I know? My daughter is now in her second year in SMU.

These are practical considerations, do not wait until too late.

- Thomas Phua; December 23, 2007 11:16 PM
dsowerg said...: Whatever happened to paying for your own education?!

My family was not well-off. I got a study loan (interest-free during studies and 1 year after graduation) - covered 80% of the fees. My mom gave me a few thousand dollars each year to cover the remaining 20% and my expenses. I gave tuition and worked during the holidays to earn my pocket money.

I had more than enough to cover my expenses. I even managed to get my driving licence in the meantime.

Of course, I couldn't afford to go on extravagant trips like study attachments (which require you to pay quite a hefty sum up front). It was a pity but my priorities were very clear that time.

I managed to find a job within a few months of graduation (1996), scrimped and saved, and managed to pay off my loan within 3 years.

I'm not the only one who went through this. I know at least two others who did the same.; December 24, 2007 8:23 AM
Anonymous said...: What if you haven't saved like many poor people, can your children get into university? If your children qualify for a place can they get a place? The answer is yes and yes.You can have help from a scholarship, loans to free loans and all sorts of financial helps.
If you haven't saved for your retirement????????
It is gone to the dogs?
Prioritize!!; December 24, 2007 9:16 AM
eng60340 said...: i graduated from local uni.

don't understand why ppl think that it's expensive. it's actually quite affordable.

if the annual school fee is say 8k.
then, (in my time year 1996)
30% can be borrowed from parent cpf
70% can be borrowed from banks.

so you just need to save up for daily expenses.; December 24, 2007 2:40 PM
jiante said...: If you do give it some thought, it would be better to send your child to university, even though the fee may have increased. Why?

That is because they will be earning enough as a graduate in the future to pay off the loan (should you have not enough money to sponsor your child)
Do not forget that salaries increase in the future too.; December 25, 2007 2:17 AM
Anonymous said...: Do you provide for your child's college education fund? Yes, but after setting aside your more important needs because if you don't no one is going to provide for you. Certainly not insurance agents becuase he or she will be trying to get you to buy an education policy for the high commission. What about your retirement? That can wait, they tell you. Make the education policy commission first before it slips through their fingers.Change the tune later and this time they tell you retirement is important.There you are , another commission. They manipulate you like an idiot puppet.; December 26, 2007 11:34 PM
Anonymous said...: Some idiots just cannot stick to the topic and keep attacking insurance agent.

I respect those who got through University with study loans, this perhaps will teach them values in life better than those who have their parents to shoulder their fees.

Some time I wonder if it is better to let my kids use my CPF and let them have the responsibility of paying back, or just pay for the fees and let them start working life, loan free.

As parents, it is a responsibility to provide.

But if not, then the children will have to work harder to go through the University.

I respect those who have to work for their fees.; January 03, 2008 9:07 PM