What’s really best for your child?

By Joanne Poh, 20 September 2018 12363

As parents, we often lament the high cost of raising children in Singapore. In this article, we look into the main bulk of this cost, and if these costs are really necessary and best for your child.  

Out of 404 respondents who took part in a Nielson survey commissioned by Income1, an average of 21% of expenses was allocated to children. Out of this 21%, the bulk of 44% was spent on tuition and enrichment. Turns out that parents spare no cost when it comes to ensuring that their children get a head start in life. However, is enrolling your child for enrichment and tuition really what’s best for them?
                             

Singaporean parents are willing to pay a high price for tuition and enrichment


 
Children’s education and development needs were parents’ highest priority, with 86% of parents identifying it as their top financial priority, beating retirement planning at 65%1. This means that while parents are thinking of the best way to save money for their kids, they could be putting other financial priorities such as retirement planning in the back seat. 
 

When asked on their motivations for priotising their children’s education and developmental needs, 66% of parents said that they wanted their children to be equipped with the basic academic qualifications which will allow them to compete in the future. Another 66% of parents wanted their children to be equipped with fundamental life skills to survive in the competitive world. 63% of parents saw prioritsing their children’s needs as a basic responsibility in being a parent that they had to fulfil1. To this end, saving for college or university is a major theme for parents, with the average parent spending an average of $96,000 on education, according to an HSBC survey2.
 

As a testimony to the popularity of tuition, the majority of youths in Singapore today report having been enrolled in tuition and enrichment classes as children. A 2015 Straits Times report3 stated that 7 in 10 parents enroll their children in extra classes.

There was a strong perceived relationship between their children having basic academic qualifications and fundamental life skills with their children being “future-ready”. We challenged this perceived relationship by interviewing 199 youths from 19-25 years old to understand their opinion on the perceived importance of education and developmental needs1.
 

Youths may not necessarily feel the same as their parents do about tuition and enrichment


Although education and developmental needs may be parents’ top financial priority, children may not share the same view. 

 
While parents were allocating 44% of their monthly child-related expenditure to tuition and enrichment, youths felt that their parents should only be spending 17% if their children-related expenditure on tuition and enrichment, a 27% gap1.

When we look into the effectiveness of tuition and enrichment classes, the aforementioned Straits Times report3 found that only a third of all parents whose children were enrolled in tuition could conclusively say that their grades improved noticeably thanks to tuition, which indicates that parents themselves are not sure if tuition is helpful.

While many youths do not deny the usefulness of tuition and enrichment in small and select doses, it is important to weigh the benefits and costs of investing heavily into these enrichments.

We interviewed some youths to find out their thoughts on their tuition experiences:

Samuel (24 year old SMU student, attended tuition sessions for A. Math and E. Math in secondary school, and chemistry in JC) has mixed feelings about his tuition experiences. On the one hand, he recognises that tuition can be useful for students who are facing difficulties in certain subjects.

“They get to have the undivided attention of a paid external tutor who can help them learn and understand difficult concepts at their own pace,” he says.

However, he admits that tuition is not always helpful. “Given a choice, I would have opted out of my mathematics tuition in secondary school,” he says. It was his parents’ decision to enrol him in these classes.
He adds, “I believe tuition is not required if the student is able to follow his classes at school and is disciplined enough to complete assignments and study on his or her own regularly and consistently.”

Rong Jian (22 year old NTU student, began group tuition in primary school) thinks the usefulness of tuition depends on the students and teachers themselves.

“The student must be willing to learn and prioritise their studies,” he says. “I know a few friends who flunked despite the tutor’s efforts. The tutor’s teaching methods are also important as they might not be suitable for the students.”

For Nickolaus (21 year old intern, attended Math and Science after school lessons), tuition was largely beneficial. “I would not have opted out of the tuition as, on hindsight, they benefitted me in some way or other, both academically and as an individual.”

However, he emphasises that tuition is not necessarily helpful, and a lot depends on the student’s attitude and the syllabus being taught by the tutor.

“If the student is not open to learning, he might not have any takeaways from the tuition sessions,” he says. “Morever, it is not helpful if the tutor only teaches students what the school has already taught, but omits teaching them academic-enhancing skills. Such skills would include analysis, writing styles, deductive and inductive reasoning, and so in. In such cases, the students would simply be spending their tuition time ineffectively and tuition would then be a wasted investment for the students and their parents.”
 

Neglecting retirement planning shifts the financial burden to children


Now that we’ve heard both parents and children’s view, we looked into how this significant spending on education and developmental needs may affect parents’ readiness to retire.

94% of parents were not confident they will be able to maintain their current lifestyle when they retire. The rising cost of living due to inflation and overheating of Singapore’s economy bodes an uncertain future for the next generation of retirees. Yet, 90% of parents were still willing to give up savings meant for their own retirement for their children’s education and developmental needs1.

The reality is that the burden of financially supporting them will likely fall on their children. When we asked youths on their views of their parent’s retirement, we found out that youths had little confidence that their parents can rely on their own savings for retirement, with 66% already having considered the additional cost of looking after their elderly parents1. However, only 8% were very confident that they will be financially able to support their elderly parents1.

The financial burden is a tough one to bear. 70% of youths expectd to downgrade their lifestyle in order to look after their elderly parents, while 48% foresaw having to put aside their personal hobbies and interests to do so1.
For Samuel, these responsibilities have already materialised as his parents are already retired. His future career plans have been made with them in mind.

“I decided to work towards a career in a competitive corporate industry, namely banking and finance, where I will be able to earn more to support them. Bearing that in mind, at university I felt like I had to work harder than my peers in order to achieve that goal,” he says.
 

It’s a tough choice – Ultimately, parents make the best choices for their children’s interest


Tellingly, 80% of the youths surveyed1 agreed that their parents should save for their retirement and spend less on tuition and enrichment. When asked about their thoughts on their parents’ retirement planning, 90% felt that they would have less financial commitment if their parents made retirement plans for themselves.

As parents, we always do things in the best interest of our children. While education and developmental needs are important and ideal to have, we also need to look after our retirement. Only by doing both, will we be able to give our children the best future possible by giving them the financial freedom to explore the career of their choice, and the lifestyle they want to pursue.

To learn more about how you can better prepare your finances for your family, visit Financial Planning for Savvy Parents



1The research was conducted by Nielsen and included quantitative and quality studies. It covered over 400 parents between 30 and 55 years old and some 200 youths between 19 and 25 years old.
2https://www.straitstimes.com/singapore/spore-parents-pump-96k-into-kids-education
3https://www.straitstimes.com/singapore/education/7-in-10-parents-send-their-children-for-tuition-st-poll "
    

Important Notes:
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.

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