How to save for your children’s education

Whether it’s school or further education, unless you’re on a massive salary, you’ll need to put some thought and planning into how to save and put money aside for the fees. The earlier you start, the easier it will be.

Annual fees at international schools in Singapore vary from around $12,000 to over $54,000; and that’s before the extras such as school trips, books and music lessons. Even more dispiriting, the cost of a full-time, three-year course at Singapore Management University, including tuition and living costs, can cost nearly $170,000! If your child goes to university overseas, you’ll have to factor in accommodation and fees there, too.

Let’s look at some scenarios and ways you can save for or finance education:

#1 Funding from capital

Tax-efficient investments can be used to maximise the return on whatever capital you’ve saved for your child’s education. The younger your child is, and the further from needing the funds, the more investment risk you may be able to assume, thus increasing potential growth.

As the time you need to use the funds approaches, you may consider moving them into more conservative investments, to help preserve their value. Careful monitoring of the investment will ensure that the money is available when tuition is due.

Example 1
Mr and Mrs Jones plan to send their daughter Emily to university in 15 years’ time. The university fees are currently $50,000 per year. Adjusted for inflation at a rate of 5% per annum, the cost of a three-year university course in 15 years’ time will be $311,839.

To reach this amount, Mr and Mrs Jones would need to invest a lump-sum of $150,000 today, based on a 5% growth rate on their lump-sum investment.

#2 Funding from income

Many parents don’t have the capital to invest for the future, so they must use their income to build an education fund. One way to invest smaller amounts regularly is through unit trusts. These are pooled investment funds that give access to a wide spread of shares, and other securities such as bonds.

As with funding from capital, the length of time of the investment and attitude to investment risk is key to successful planning.

Example 2
Taking the same example above, Mr and Mrs Jones would need to save $1,173 per month to obtain the $311,839 needed to fund their child’s university fees in 15 years’ time (based on a 5% growth rate).

Seek advice and prepare early!

Education fees are increasing all the time, so the sooner you start planning, the better. Contact AAM Advisory today to discuss your investment goals for your children’s education.

Don’t put this off – delaying an education savings plan by just one year can have a dramatic effect on the end sums.

Written in collaboration with AAM Advisory

This communication is intended for information purposes only. It may not be published, circulated, reproduced or distributed in whole or part to any other person without prior consent of AAM. This should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any products mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed wealth manager regarding the suitability of the investment product before making a commitment to purchase the investment product. While we have taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this document is subject to change without notice. The above report may contain data obtained from third parties and as such we cannot guarantee the accuracy of this data. The value and any income accruing to the investments, if any, may fall or rise. An investment is subject to investment risks, including the possible loss of the principal amount invested. AAM advisory Pte Ltd is licensed by the Monetary Authority of Singapore, FA Licence no 100032.

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