What is Child Education Planning?
A Thorough Comparison & Analysis
There is immense joy being a parent. While we love the excitement that our children bring to our lives, we always constantly think about their future. Their education, in particular, is a major concern and a major financial commitment.
Child Education Planning is a combination of investment and insurance that usually supports the expected needs and requirements of the child at the right age.
Through Child Education planning, you can cover your children’s education expenses and safeguard their future.
Table of Contents
Why do you need a child education plan?
Child Education savings plan are suitable for parents who do not prefer to take too much risk and yet want to gain better returns than putting in the banks do while saving for future Child’s Education cost. There are now endowment plans specifically designed for the education of children, which distribute the maturity value payout over the years of the university instead of just offering a lump sum at the end of the policy.
There are only have 2 options in child education planning...
Either you save money and earn interest prior to the time when your child needs the money, or
Borrow money and pay the loan interest
For many Singaporean parents, a fervent wish is to guide children to good university education through their school years. Many see it as their parental obligation to pay tuition fees, even if they are much more expensive for studies abroad.
By doing Child Educational Planning, you can ease off the “Education Loan Interest” which may eat into your retirement funds while gaining interest paid when you save.
What are the loans, grant and scholarships?
Apart from saving up, you can get help to fund your child's education in a few ways:
1) Universities may provide subsidies, grants and scholarships for eligible students.
2) Study loans from banks. You should shop around and assess which loan option is better for you.
3) Tuition Fee Loan scheme for approved institutions. The loan is interest-free during the period of study. You can check with the institutions on this scheme.
4) CPF Education Scheme allows you to borrow from your CPF savings to pay for your child’s education. This is for local universities and subject to the withdrawal cap limit. Take note that your child will have to repay the amount withdrawn, plus accrued interest which you would have otherwise earned on your CPF savings.
You may also want to check out the comparison between the CPF Education Scheme and MOE Tuition Fee Loan Scheme.
How should you choose the child education plan?
Are the saving returns good?
Since your objective is to save for Child Education, the greatest concern for you is to get a good return. An educational plan normally provides projected returns of more than 3.5%, which is a good return for endowment plans.
Payouts flexibility before reaching university age?
Think about whether you would like to have the choice of small payouts at significant milestones in your child’s academic path to reward him/her with vacations or presents, and whether you want such small payouts even closer to university years.
If you do not need to withdraw the money, you can always deposit these payouts or reinvest with the insurer in order to acquire a higher interest (around 3%, subject to the discretion of the insurer) and can be withdrawn at any time as liquidity is an advantage for Child Education Plans.
Apart from saving up, your child may also work part-time or on term holidays to help pay part of their living expenses. However, do you want your child to pay off the debt with interest or do you want to save while earning interest and having them to fully concentrate on their education instead of worrying about the education loan debt?
We know that it is necessary for you to save for your child’s university education. It pays to take responsibility now and start planning today!