There’s a recent news update that our Tertiary Education in Singapore is going to cost more. And the fee hike is applicable to this year’s cohort. Ouch!
So for those parents who are working hard to send their little ones in 10, 15 and 20 years time, what’s the financial impact should the fees of Tertiary Education to increase on an annual basis?
*For illustration purpose, I will be using the increment as 4% on the current annual fee of $7,170. Also assuming that the duration to get a degree is 3 years. Therefore, the total fee that we are looking at is $21,510. This amount is not inclusive of living expenses.
So, the new fee will be:
– $31,840 (an increment of $10,330 ) in 10 years time
– $38,738 (an increment of $17,228 ) in 15 years time
– $47,131 (an increment of $25,621 ) in 20 years time
And if you are concerned in planning for your little ones, here are a few common alternatives that you may consider in helping you to do so. There are also a few considerations that you may wish to take note.
1. Getting A Scholarship
If your little ones have a certain level of talent when they are young, do help to them to cultivate on the talent as young as possible. But… do not force them too hard! Let them appreciate their childhood as well.
There are many scholarships available. So once they are ready for it, do apply for them and if they are successful, the benefits can be two-fold, 1) Full Sponsorship of their University Education, 2) A Guaranteed Career once they have graduated. There are also the usual terms and conditions attached to any scholarships, so do go through them carefully.
2. Saving In A Savings Account That Gives 1% Interest Per Annum
There are certain savings account that allows you to contribute on a regular monthly basis and also the flexibility to stop or withdraw at your own discretion. The average interest on such account is usually 1%. So to help you to achieve the desired annual tertiary education fee, the average monthly amount that’s required is:
- $253 per month to get $31,840 in 10 years time
- $200 per month to get $38,738 in 15 years time
- $178 per month to get $47,131 in 20 years time
As you can see from the above, the amount required to save per month reduces given that the time frame is longer. What you can learn from here is that, you need to plan early and be committed to it. If you plan slightly later, you will have a higher commitment in terms of savings, leaving you lesser for other stuffs.
3. Saving In An Endowment Plan That Gives An Average 4% Interest Per Annum
An Endowment Plan is basically a Regular Savings Plan under an Insurance Company. Under such a plan, your little ones and you will be provided with some form of insurance coverage like Death and Permanent Disability Benefits on the little one and a waiver of future premiums coverage on the applicant.
An average Endowment Plan can give around 4% interest per year and this figures do vary among the insurance companies. So if you have intention to go into one, do source out a few, understand the performance of the insurance company and the average performance and bonuses that they are giving back. Do note that the drawback of such plan is that it’s not advisable to terminate or stop the plan midway, you will suffer
So, the average monthly amount that’s required is:
- $220 per month to get $31,830 in 10 years time
- $161 per month to get $38,738 in 15 years time
- $131 per month to get $47,131 in 20 years time
As compared to Option #2, you will notice that your regular contribution is lesser now because you are forgoing the flexibility of stopping or withdrawing the plan early in exchange for a higher return. You will also be getting an additional benefit – insurance coverage to protect against any unforeseen circumstances.
4. Saving In A Unit Trust Fund That Gives An Average 8% Interest Per Annum
A Unit Trust Fund is usually a collection of stocks of some companies or indexes that is managed by a Fund Manager. Nature of such savings tool is that there’s no guarantee at the end of day, and really dependent on economic conditions, the nature of the Fund and the investment strategist of the Fund Manager. Once-a-while monitoring would be required to ensure that you are always on the right track.
On the average, your monthly amount that’s required is:
- $183 per month to get $31,830 in 10 years time
- $118 per month to get $38,738 in 15 years time
- $85.75 per month to get $47,131 in 20 years time
Similarly, you would need a lower contribution amount for a savings tool that gives a higher return in exchange of risk and the requirement to monitor.
Other Important Considerations To Take Note:
Planning for your little ones’ Tertiary Education is an important and a costly one. Do not forget that that the illustrations here are for a 3-year local university, you may also have to consider:
- the living expenses during the studying
- the cost for a 4-year course instead
- that an overseas education is a better option – the actual cost and expenses needed
- the need to plan for other education – primary, secondary, junior college or polytechnic?
After taking these into considerations, the next few things to consider:
- the amount of time left to plan
- the amount of money to set aside
- the amount of risk to plan with