Securing Your Child’s Educational Future: A Guide On How To Start
Planning for your child’s education is stressful. In Singapore the mere thought of it is enough to give some of us a mild panic attack.
That’s why we’re here to help make things as stress-free as possible.
As a parent or parent-to-be, planning out your child’s educational future is essential to ensuring your finances are healthy even when it’s time to fork out large sums of money for your child’s tertiary education.
Not sure where to start, or what to think about when making these plans? Don’t worry, we’ll guide you through taking that first step (and subsequent ones) to ensure you’re more than ready to meet your child’s educational needs in the future.
Think About Your Own Financial Protection First
Wait, aren’t we talking about providing for your child’s future education? Why is it about you now? This can seem a little counter-intuitive, but do hear us out.
As parents with dependants, your own financial well-being is key to managing your family’s finances. Should anything happen, such as unexpected medical expenses or financial instability from losing a job, then your means of supporting your family can be significantly impacted.
So while your child’s education is undoubtedly important, it’s essential to first have a “backup” for yourself, so your finances and savings are protected from unexpected hiccups.
Manage The Spending On Your Child
One thing that parents often overlook is their current spending on their children with regards to tuition and extra-curricular lessons. While providing your child with the very best is ideal, it must be balanced out by whether it makes financial sense in the long term.
Do weigh out the costs of different tuition centres, and also manage the number of extra-curricular activities your child attends to ensure you have enough saved for their future in addition to cover your family’s daily expenses.
The Importance of Early Planning
Education is costly, and expenses are expected to rise in the future, at the very least due to inflation.
So while it may seem like it’s 15 years too early to be planning for your child’s university education, starting early and preparing yourself for the future outlay will take away a lot of pain when the time comes.
Let’s do some simple calculations to illustrate this.
If a local university course costs S$40,000, then saving early with a monthly outlay of S$300 at an interest earning rate of 4% annually, for 15 years, can potentially cover most of the cost of 2 children’s education.
Year 1: S$300 x 12 months x 1.04 = S$3,744
Year 2: (S$300 x 12 months + S$3,744) x 1.04 = S$7,637.76
Year 15: If we continue these calculations, you’ll end up with an amount of S$74,968.31.
In comparison, if you start 5 years later and save at the same rate for a period of 10 years, then you’ll only have S$44,950.87 at the end of the term, which might only be able to cover 1 child’s education.
How To Start Planning and Working Out Your Savings Gaps
Scoping out possible education paths and costs
While your child is a long way from their tertiary education, it’s always good to have a vision in mind to start your planning.
Granted, you might be unsure at this juncture if your child might be better suited for local or overseas education. Beyond the dollars and cents, don’t forget to consider these other key points here.
Normally, an overseas education is what will drain your finances if you’re unprepared. If the time comes where your child wishes to apply for overseas universities, you would not want finances to stand in the way of your child’s goals. As a first step, search online for the approximate cost of tuition fees in popular countries such as Australia, the UK, and the United States. Remember to also factor in costs for accommodation, insurance, and living expenses. You might also want to refer to our comprehensive guide on how much to budget for an overseas education, but bear in mind that these figures are subjected to inflation till the time your child enters tertiary education.
Even for those who prefer tertiary institutions in Singapore, costs could differ depending on whether you choose a local or private university – do check out current and previous years’ course fees as an estimate. Following which, take a prudent estimate of annual inflation rate, to calculate how much your preferred course might cost by the time your child enters university.
Evaluate your savings options to reach your savings goal
Once you work out approximately how much you need, evaluate your savings options to understand the gap you have. You can then easily work out how much you’ll need from an insurance savings plan to send your child to an overseas university. Uncertain about saving so much only to not need it for your child’s education down the road? No worries, at least you know you’ll still be able to use this saved up sum of money elsewhere, or even reinvest the maturity proceeds.
Choosing The Right Insurance Savings Plan
Now that you have a figure in mind, it’s time to find the right insurance savings plan for you.
Insurance savings plans, also known as endowment plans, are designed to offer both protection benefits and savings. This means that such plans not only include a life protection component, but are also able to accumulate a cash value over time.
A crucial consideration in all of this is your risk appetite. If you’re not looking at a high-risk investment or it’s your first time dipping your toes into investing, then a plan like Gro Cash Flex Pro could be a good place to start.
This plan provides a peace of mind with guaranteed capital1 upon maturity — this means that you can get back at least all of the premiums that you have paid once the plan matures. This makes it an ideal low-risk option for your child's education savings.
There is also the flexibility of how long you wish to pay for your premiums, and the subsequent number of years of your policy term. This will depend on your own lifestyle and financial situation and goals.
To maximise the benefits of Gro Cash Flex Pro, consider the following pointers:
- Explore additional riders — depending on your needs, consider adding riders to enhance the coverage of your policy, such as Savings Protector Pro2 that covers Total and Permanent Disability (TPD) and retrenchment, or Cancer Premium Waiver (GIO) rider that waives future premiums in the event of diagnosis of a major cancer during the rider term3.
- Start early — This is something we’ve mentioned above, and we can’t stress how important it is to allow more time for your money to grow through compounding.
- Review regularly — Review and adjust your insurance savings plan periodically as life circumstances and financial priorities may change. You can connect with our advisors to tailor the plan to your ever-changing needs.
Time is of the essence - kickstart your savings journey today to set aside a comfortable sum for your child’s education.
1 Capital guarantee on Gro Cash Flex Pro excludes any optional rider(s), on the condition all premiums are paid, and that the policy is held until maturity date with no policy alterations or claims made during the entire policy term. This applies to policies paid yearly only.
2 Savings Protector Pro is a non-participating rider, which includes the TPD Benefit and Retrenchment Benefit. Please refer to the policy contract for further details.
If the policyholder becomes totally and permanently disabled (TPD before the anniversary immediately after the policyholder reaches the age of 70) during the premium term, the TPD Benefit allows you to stop paying premiums on the basic policy for the remaining premium term subject to the terms of the policy contract. If the premium for the basic policy and Savings Protector Pro rider has already been fully paid, only the lump sum benefit will be paid. The lump sum benefit is equivalent to 2 years of the annual premium for the basic policy and Savings Protector Pro rider. You cannot change the premium term or increase the sum assured after you claim this benefit.
If you are retrenched, you will not have to pay the premiums for the basic policy and Savings Protector Pro rider for six months from the next premium due date onwards. For this to apply, you must meet all the following conditions.
- You must have paid at least six months’ premiums.
- Your retrenchment must have taken place no earlier than six months after the cover start date.
- You have not been able to find employment for three months in a row after being retrenched.
3 This is applicable only after one year from the cover start date. Cover start date refers to the date we issue the rider or the date we issue an endorsement to include or increase a benefit; or the date we reinstate the rider (whichever is the latest). However, if the insured is diagnosed with any one of the major cancer within one year from the cover start date, we will end this rider and refund 100% of the premiums paid on this rider. You will then have to continue paying premiums for your Gro Cash Flex Pro policy. The insured must survive at least 30 days after the insured is diagnosed with a covered major cancer before we pay the major cancer benefit. We will not pay this benefit if the insured suffered symptoms of, had investigations for, or was diagnosed with, or received treatment for any cancer, including carcinoma-in-situ, before the cover start date. You can find the usual terms and conditions of this rider, full list of our specified major cancer and their definitions in your policy contract.
This is for general information only. You can find the usual terms, conditions and exclusions of this plan at www.income.com.sg/gro-cash-flex-pro-policy-conditions.pdf. All our products are developed to benefit our customers, but not all may be suitable for your specific needs. If you are unsure if this plan is suitable for you, we strongly encourage you to speak to a qualified insurance advisor. Otherwise, you may end up buying a plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. Buying a life insurance plan is a long-term commitment on your part. If you cancel your plan prematurely, the cash value you receive may be zero or less than the premiums you have paid for the plan.
Information is correct as at 23 February 2024.
This article is meant purely for informational purposes and does not constitute an offer, recommendation, solicitation or advise to buy or sell any product(s). It should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. Please seek independent financial advice before making any decision.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact Income Insurance or visit the GIA/LIA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org.sg).
This advertisement has not been reviewed by the Monetary Authority of Singapore.
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