Your financial priorities will evolve as you age, depending on your life stage, wealth aspirations and personal commitments. In Singapore, almost one third of the affluent rank saving for their child’s education as their top financial priority; taking precedence over other financial goals such as investing in property or saving for retirement. Unsurprisingly, there is good reason why parents want to set aside a tidy sum for their child’s tertiary education, and it has to do with the cost of school fees, even after you factor government subsidies.
On average, subsidised local university fees will cost you about S$23,000 to S$40,000 for a 3-year course. This amount is significantly higher for courses in medicine. For example, a 4-year dentistry course at the National University of Singapore can set you back S$117,200, which amounts to around S$29,300 per year. Undeniably, an overseas education will cost more than a local degree when you factor in accommodation, living expenses and pricier course fees. In fact, it’s not uncommon for parents to fork out up to S$100,000 for one academic year alone!
Whichever option your child chooses, the cost of a higher education doesn’t come cheap. This means paying for your child’s tertiary education will require careful financial planning, preferably years before your child approaches their late teens. There are various ways you can better prepare your finances for your child’s future. Here are some tips on how you can grow your savings and work your way towards your goal.
Start early
Don’t wait until your child is only a few years away from starting their tertiary education. The earlier you start to save, the more you benefit from the effects of compounding returns. Compounding, in a nutshell, is simply the ability of an asset to generate returns over time. For instance, an initial S$10,000 investment with an 8 percent annual growth rate would become S$100,000 after 30 years. That’s a tenfold return rate or ten times what you have invested. If you are a new parent, this is the best time to start: when you still have years to fortify your savings.
Set your target
Next, you’ll need to determine the approximate amount you require and the number of years you have to reach your target. One top of that, you’ll have to take cost inflation into account as well. It is estimated that a 4-year non-medicine degree course can cost more than S$130,000 by 2035. From here, identify how much you need to save on a yearly basis to reach your savings objective. An endowment plan might be a good option, so you can grow and safeguard your savings with a capital guarantee.
Supporting your child’s education needs
Nothing quite describes the joys of parenthood. Nurturing a child from toddlerhood to seeing them blossom into an adult is probably one of the most fulfilling roles. At Prudential, we understand your commitment as a parent to securing your child’s future success. As a result, we have a selection of flexible insurance solutions to help you reach the different milestones in life, from financing your child’s university education to building your nest egg.
Speak to your Financial Consultant or your Banker on how you can start planning for your child’s future today.
This article is for your information only and does not consider your specific investment objectives, financial situation or needs. We recommend that you seek advice from a Prudential Financial Consultant before making a commitment to purchase a policy.