How to start saving for your child’s college education

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saving for university education singapore

One second they are crawling around the house saying ‘goo goo da da’ and before you know it, in the blink of an eye, they are excitedly waving an admittance letter from a top university saying, “Dad and mom, we’ve got this right?”

Well, dad and mom better be prepared, because Singapore isn’t getting any cheaper when it comes to college education.

Note also that the country seems in no hurry to shed off its ‘most expensive country in the world’ title, which means creating a thorough roadmap for your child’s college education needs, several years down the line, is not optional anymore.

Related: Average Cost of Education in Singapore

How much does a university education cost in Singapore?

As you put your child through the first few years of school, you may wonder what all the fuss is all about. That’s because of the Ministry of Education (MOE)’s subsidized education schemes wherein basic primary and secondary education in Singapore can be completed with S$2,500. But come university education and it looks like a whole new ball game.

For the academic session starting 2018, all six public Singapore universities have announced a fee hike, a trend seen since 2010. Tuition fees for the new intake of Singapore citizens will go up by about 0.4% to 0.6% for most undergraduate programmes.

Singapore citizens who study medicine and dentistry at National University of Singapore (NUS) will have to pay S$28,400 in tuition fees a year, an increase of 3.6%, from last year.

Those who enrol at Yale-NUS College and Yong Siew Toh Conservatory of Music will have to bear a raise of 2.6% to 3.9%.

Two factors make all the difference when it comes to the college expense figure – your child’s nationality and type of programme selected.

If your child is a Singapore citizen

Well, thank your stars – and Singapore’s subsidies! On an average (based on universities like NUS and NTU), an undergraduate who is a Singapore citizen needs to pay between S$8,150 and S$33,000 per annum for a three or four-year degree. As a Singapore citizen, your child is automatically eligible for MOE’s tuition grant that can shave off between 50-80% off the total tuition fee.

If your child is a Permanent Resident (PR) in Singapore

A basic three-year bachelor’s degree would set you back by S$11,400 per annum. Choose medicine or dentistry and the fee shoots up to S$38,350 per annum.

Don’t start crunching numbers yet. This figure does not include housing, transport, meals and other fees and expenses which is estimated to be around S$6000 per annum in Singapore.

If your child studies abroad

Sending your child to a good university abroad is an excellent move all-round. But without good old MOE’s tuition grants (and even with some scholarship), expect to fork out a good sum. Australia and the UK are among the preferred destinations for Singaporeans and here’s how much it costs.

In 2017, the average cost of an undergraduate degree for an international student in Australia was estimated to be around S$29,000 per annum while it was about S$20,000 to S$37,500 per year for masters’ degree students. According to Times Higher Education, in 2017, international students paid between £10,000 and £35,000 (roughly S$18,000 to S$62,000) annually for lecture-based undergraduate degrees. An undergraduate medical degree can cost overseas students up to £38,000 (S$67,000) per year.

How to start saving for your child’s college education

A study by the Economic Intelligence Unit (EIU) in 2016 estimated that a four-year degree in Singapore will cost a whopping 70.2% of an individual‘s annual income by 2030, up from 53.1% in 2015.

You don’t want your child laden with debt as soon as they step into the real world after college so what can you do? Here are some steps we recommend.

Related: Tertiary Education in Singapore: What Payment Options Do You Have

Start now!

Think of it this way, the earlier you save, there is more compounding interest to earn. Start by estimating how much you will need to save. Your child may love dabbling in colours but that’s no guarantee they will pursue an arts degree. To be on the safer side, make your calculations based on the high tuition programmes like medicine. Don’t forget to factor in a yearly 3.5% inflation! In Singapore, the entry age to university is around to 18-20 years so determine how many years you have left to save for college. Now that you have a ballpark figure, you can earmark a sum every month towards your child’s college fund.

Buy an endowment plan

Education and high-risk investments are a no-no. But a safe low-interest savings account won’t cut it either. We hear you. Look into an education endowment plan. These insurance plans are specifically designed to meet your child’s university costs where the premium you pay every month gets accumulated and grows every year as per the rate of interest. The average rate of interest for such plans is around 3.5%-3.75% with a premium duration of 5, 10, or 15 years.

One major advantage of this plan is that instead of receiving a lump sum at maturity, you can choose to get the money in three or four payouts for the three or four years of college.

Maximize your child’s Child Development Account (CDA)

Within 18 months of your child’s birth, you would have received an S$8,000 bonus from the Singapore government into your child’s CDA. You can take advantage of the government’s dollar for dollar match scheme and make regular contributions to this account and have the government match the same amount. This amount also earns an interest of 2%. After your child turns 12, this amount will be transferred to their Post-Secondary Education Account (PSEA) where you can earn a 2.5% interest until your child is 30 years old.

This amount will not be able to fund the whole tuition fee but going to college involves a whole range of miscellaneous expenses and this can help give you a head start in meeting them.

Create an emergency fund

You’ve got yourself a nice little education fund going, in a savings account (with over 3.5% interest hopefully) or an attractive education endowment plan so it may seem like you’re all set. But stop to consider this.

Related: 20 Wasteful Things That Parents Spend on for Their Kids

What if there was an emergency and you needed a big amount urgently? You might end up with no other option but to tap into the fund you have painstakingly built for your child’s education. That, even though resorted to as a last resort, could end up throwing cold water on your child’s college fund.

The solution? Create an emergency fund for such a situation that’s separate from your child’s education fund. The rule of thumb is you should have an emergency fund that can help you stay afloat for six months. Sounds steep? Why not start small and build it up eventually?

Ensure that you contribute a percentage to this fund out of every paycheck.

Related: 5 Frugal Things to Do Daily for Better Savings

Got an attractive year-end bonus? As tempting as it might be to indulge yourself with retail therapy, directing this amount towards this account or splitting half with your education kitty, is the more prudent move.

Lastly, cut short frivolous expenses and use money-saving hacks like cash-back credit cards, air miles for travel and don’t hesitate to cut that coupon in the newspaper. Every drop makes an ocean, after all.

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