Plan ahead for junior's education
In this fifth instalment of a six-part series brought to you by Tokio Marine Life Insurance Singapore, we explore the concept of education funding
All parents want the best for their children, and a big part of securing a successful future for them lies in education.
With the increasing cost of tertiary education in Singapore and overseas, it would be prudent of parents to plan ahead for a robust education fund to meet their children's needs.
My Paper spoke to Ms Chung Yuw Yu, a senior financial-planning consultant at Tokio Marine Life Insurance Singapore (TMLS), about education funding and how life insurance can help.
When should you start planning for a child's education?
With increasing tertiary-education costs, many parents start to plan for a child's further-education fund almost from the time the child is born.
Most children here attend university at 19 (for a girl) or 21 (for a boy, after serving national service).
There are not many years to accumulate funds to send two or more children for tertiary education, especially if there are plans for overseas studies.
What should you consider when planning a child's education fund?
We strongly encourage parents to first review and ensure that they have an adequate income-replacement plan, before planning for a separate fund for their children's education.
This is because, should anything happen to the parents, the children's basic needs must first be taken care of.
Parents may want to consider the following factors when planning for an education fund:
1. ANNUAL TUITION FEES
Depending on your financial ability, first decide whether you are preparing for a local or an overseas tertiary-education fund. If overseas, consider which country and what type of university you are looking at.
This is to ascertain how much you would need to set aside for your child by the time he is ready to apply to the university.
2. LIVING EXPENSES
Apart from tuition fees, we must take living expenses into consideration, especially for those going overseas.
You may want to factor in some of the following:
(i) Accommodation costs (on campus or off campus)
(ii) Living expenses (including books, allowances and incidental expenses)
(iii) Travel expenses (home trips or parental visits)
3. LOOKING AHEAD
In planning ahead, we need to take into consideration course-fee hikes, as well as inflation.
Assuming there is a course-fee hike of an average of 6 per cent per year, a three-year course fee of $25,260 today would be about $81,000 in 20 years' time.
What's more, the cost of education overseas would also be subject to currency risks.
What are some of the common challenges parents face when planning for their children's education?
For most of us, setting aside close to $100,000 in 20 years is already a challenge, let alone setting aside (that) amount for two or three more children.
Premature death or the impaired health of a parent can render your family unable to continue the savings programme, regardless of how disciplined and determined you are.
How can insurance help with education funding?
An endowment policy can help build an education fund and have it ready by the time the child applies to university. The policy acts as a forced-savings programme that works towards the financial goal.
There are riders designed specifically to alleviate parents' concerns over the inability to continue the policy in the event of premature death or impaired health.
At TMLS, we recognise the need to plan ahead for our children. So we place ourselves in the shoes of parents who want to give their children the opportunity to fulfil their potential.
Planning for your child's education should be worry-free.
We strongly encourage parents to add waiver-of-premium riders on both parents' life-insurance plans so as to have absolute peace of mind knowing that, whatever happens to either parent, your child will have the funds to attend the university of their choice.
For more information on the types of insurance available, speak to your preferred adviser or visit www.tokiomarine-life.sg