Last Updated on May 31, 2022 by Parentology
There are few things better than raising a child of your own. The ups and downs that come with parenthood are what makes life worth living for many people. However, once you become a parent you will find that life as you know it, will never be the same again. You will be presented with problems and challenges that you never had to face before in your life. Such as the fact that your cost of living just went up!
So how can you budget your money to ensure that you can provide your family with a good life and to prepare for your little one’s future education?
How Much Does Education Cost?
The amount of money you will be spending for your child’s education can be quite surprising. So let’s start from the beginning. Many parents typically put their children into childcare and the younger the child is, the more childcare is going to cost. You are looking at $450 to $5400 per month! However, if you do not include infant care, the average is around $450 per month. On top of this, you also need to factor in food, healthcare, toys, clothing, and other expenses. So with everything added up, you may end up spending well over $36,000 just for childcare and that’s on the low end.
Primary and Secondary Schools
The Ministry of Education subsidizes a large amount of school fees, in order to provide more opportunities and to improve the literacy rate of the country. This means that school fees in Primary and Secondary institutions supported by the government will be free for Singaporean citizens. However, just because the schools themselves offer free child education it does not mean you will not spend any money.
You will need to prepare funds for various extracurricular activities such as additional lessons or even field trips. You can expect to pay around $2,000 for both primary and secondary education.
Compared to other countries, the cost of a tertiary education in Singapore is quite expensive. You can expect fees of around $3,000 as a Singaporean citizen and if you are a foreigner, you may need to spend upwards of $10,500 just in annual fees. On top of this, you have other fees to consider such as statutory license fees, insurance, student union fees, sports, and more.
However, on the flip side, university students are able to utilize government grants that subsidize tuition fees from $10,000 to $150,000 but this will be dictated by the length of study and the course.
As you can see, child education in Singapore is not cheap but just because it is expensive it does not mean it has to be unaffordable. There are a number of options on the table that can help you pay for your child’s education such as:
Creating an Education Fund
You should try to save at least $500,000 just for your child’s education. The sticker shock is definitely real but just because this is a large sum, it does not mean it is unobtainable. There are many ways to accumulate this amount of money such as creating an education fund through an endowment plan, a savings plan, or even leaving it to financial professionals to grow your money for you behind the scenes. Before you decide on what is best for you, here is some information to keep in mind:
Some Good Reasons to Have an Education Fund
Setting up a proper education fund, whether it is a savings plan or even an endowment plan is a low commitment way to simply put your mind at ease and save enough money for your kid’s education. Without a proper education fund, it will be a challenge to muster up the cash for your child’s future but with the savings it will help you accumulate, it is a simple way to ensure you have the payout required to provide your child with the opportunities they need to thrive when they grow up.
An education fund can also provide protection in a sense. If an emergency or something unexpected happens, you can rest easy knowing your child’s future is secured.
How Much Should I Save?
The cost of education will vary widely depending on the course your child is interested in doing and you may not know this until they are about to leave for university. So, you will want to save anywhere from $50,000 to $100,000 in order to prepare for the tuition cost of the different courses available. Also, plan accordingly because the cost of education is likely to go up, along with inflation as time goes on.
It is crucial to start saving as early as you can. Being able to save up for 20 years will allow you to save much more funds compared to saving for 15, 10, or even 5 years.
It is important to keep your expectations realistic. Along with planning how much you need to save for tuition, it is a good idea to consider other things such as food, allowance, clothes, transportation, etc.
Why Should You Use a Professional Savings Plan
Is there a difference between using your own means to save money compared to having a professional platform help you? Depends on your willpower mostly. If you can set up a savings account and not touch it, then that is great but many of us will encounter problems down the road and it’ll be tempting to tap into those savings.
To make sure that the temptation is never there, you can use a professional platform to manage the funds for you, so that they will be ready for your child when they head out for college.
Investments vs Capital Guaranteed Plans
Each savings option has its own pros and cons. However, depending on how risk averse you are, you can go for investments. If you know what you are doing and can make a good investment, then you can get very large yields but the risk is also considerable. For this reason, we will typically recommend a capital guaranteed plan instead. These plans offer lower yields but you will know that the money will be there when your child needs it.
When Should You Start Saving?
The best time to start saving is as soon as you can. Your child will need the money once they are around 20 years old, so the earlier you can save, the more you can provide. When you save earlier, you can also make smaller savings payments as well, so it’ll be easier on your wallet.
It is also a good practice to put in 10% of your income into your child’s education fund.
Can I Use These Savings for Emergencies?
This will be determined by the type of savings plan you went with. Most programs won’t let you withdraw the money until the terms are up for a lump sum or until the last 3 years for batches.
However, there are saving plans that offer the ability to get cash back on the 3rd year of the policy. These are called Guaranteed Insurability Options or GIO. You also don’t need any medical underwriting for medical emergencies if you use one of these plans.
When you want to ensure that your child’s education is secured, you need to start thinking about saving up as soon as possible. There are many ways to save, so find an option that best suits you and your situation. Just don’t overcomplicate it. Don’t get too hung up on the details that you forget to enjoy being a parent. At the end of the day, all you really have to do is create a budget that will allow you to have a financial roadmap that can help you secure your little one’s future.
Raising a child is not easy and when you are living in Singapore it’s definitely not cheap. We live in one of the most expensive countries in the world and even with government subsidies and aid, we need to be smart with our money and make the right financial decisions. And one of the best financial decisions you can make is saving early for your child’s education! So figure out a good education savings plan and stick with it.
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