Today’s parents often have excellent organizational skills.
Many Singaporean parents, in addition to covering the basics, place their child on a waiting list for the top preschools and enrichment classes, and some even establish their own high quality education at home.
These parents, like many others, start putting money away for their kids’ college tuition at an early age.
Even though your child might not start college until 20 years from now, you should start saving and budgeting now to make sure there is enough money to cover their entire college career.
Is It Beneficial to Have a Degree?
Some families are still on the fence about their child’s college.
As the freelance economy expands, college may seem unnecessary and expensive. According to a Smartwealth (2021) survey, two-thirds of Singaporeans agreed that higher education is extremely expensive.
Whilst many may question the value of higher education in today’s world, many remain optimistic about the prospects for those who earn degrees from accredited institutions. 71 % of those who say college is too expensive still think it’s worth it to go there.
Having a degree offers you more outstanding remarks in job interviews, but that’s not all it does for you. It also helps you develop your critical thinking abilities, acquire the ability to hold and analyze different viewpoints, and connect with other aspiring young people who may one day lead the world.
If you share these values and wish to provide your child with the opportunity to further their education at the university level, then follow these five suggestions.
Step 1: Establish a Solid Foundation
We need to make sure your groundwork is solid before we can even talk about the fund. If this isn’t the case, then having a college savings plan is pointless.
An emergency fund, sufficient life insurance, and a solid hospitalization plan can help you weather the financial storm that accompanies an unexpected illness or hospitalization.
These are prerequisites to beginning any kind of saving or investment endeavor, whether for college or retirement. If something bad were to happen and you didn’t have things in place, you’d lose everything you’d saved.
Step 2: Choose the Kind of University Education
You and your spouse should decide together what sort of college education you want to at least cover for your child, even if it’s hard to predict what they might be interested in studying.
Price varies greatly depending on the following:
- Where to study: at home or abroad
- General education versus more specialized programs like medicine, dentistry, law, etc.
Once you have a firm grasp on the cost, you’ll be better able to plan out how much money you’ll need to set aside annually to ensure your child has a solid financial footing as they work toward earning the degree of their choice.
Step 3: Learn the Costs of College Tuition Fees and Other Expenses
The next step is to determine the precise tuition fees. According to MoneySmart, the average cost of a four-year general education degree program at a regional institution is $37,850.
The overall cost of a university education can reach up to $79,050 when housing and food costs which amounts to $41,200 per year are included.
To help you plan for the financial commitment of sending your child to a university in the United States, United Kingdom, or Australia, here is the breakdown of tuition and fees for each country.
USA
In 2021, the average college tuition cost at a public university is $10,388 USD and $38,185 USD at a private college. For out-of-state students (including international students), the average cost is $22,698 USD (U.S. News & World Report).
UK
Undergraduate – International undergraduate tuition fees vary from £11,400 – £38,000. The average cost is estimated to be around £22,200 per year.
Australia
Bachelor Degree Tuition Fees for international students in Australia begin at around AUD$20,000 per year, with the average tuition fee sitting around AUD$30,000 per year (source: Australian Universities 2019).
Step 4: Anticipate Future Expenditures by Considering Inflation
Sadly, it’s extremely doubtful that today’s tuition costs will remain the same or decrease.
The expense of higher education has increased by 80.7% since 2000, or 3% annually on average.
Just like the overall inflation rate, the rate of increase in the cost of living has been on the rise. Singapore’s annual inflation rate ticked up to 6.6% in January 2023 from December’s 7-month low of 6.5%, but less than market forecasts of 7.1%.
You don’t want to find out 20 years from now that the money you’ve been saving won’t cover your child’s expenses for the next three to four years due to inflation, or even worse, that you’ll have to tap into your retirement fund to make up the difference. If you need help figuring out how much money to put away for school, I’ve made a free calculator just for you.
Let’s say your child is interested in going to college, and the total cost of his or her education will be $36,500 (the latest cost). If your child turns one this year, you will need to save a total of $171,257.15 by the time he is old enough to enroll in college to cover his full tuition, room and board for four years. This means, you’ll need to put away $713.57 every single month in order to save up for this.
Step 5: Evaluate Your Choices
Taking in such a huge amount could be intimidating. That could cause you to question if you can continue to treat yourself to little pleasures like a cup of Starbucks coffee on a daily basis.
Beginning a college savings plan for your child does not have to mean giving up any of your favorite indulgences.
To give you the best option, you can consider an endowment plan which may offer you an exceptional balance on security and the chance for greater gains. While there are benefits to this, there are also some drawbacks to consider. Every family has its own set of challenges and opportunities, so it’s crucial that you carefully consider your options—and consult a financial professional if necessary—before making any major decisions.
Step 6: Put the Ideal Plan into Action
Have you completed every step? Putting up the effort to make the strategy a reality is crucial.
If you want the best for yourself and your kid, you need to start saving today. It will get increasingly tough if you put it off.
If you wait 10 years to start saving, you’ll need to put in a lot more money each month to get to the same point.
As your expenses are also likely to rise with time, you run the risk of not even being able to finance the amount originally anticipated.
Conclusion
There is no way around to avoid the fact that twenty years from now the price of a college education will still be high, if not significantly higher. It’s never too early to start putting money away for your kid’s future.
We favor comprehensive financial planning that takes your circumstances into account. Our no-cost, in-depth financial planning session will help you get a thorough evaluation of your current financial situation and chart the best course of action for reaching your goals.