How to plan out your spending on your kids’ education in Singapore

In a city that is as expensive as Singapore, planning your financial future is especially important because it’s a major financial commitment. Singapore’s education system ranks as one of the best in the world, and you want to be able to make sure you can see your child’s journey through.

On the bright side, education planning is easily doable if you start early. With the cost of education constantly on the rise, here’s how you can give your child the best education possible.

Work out how much you need to save

Tertiary education in Singapore is undoubtedly expensive, and is expected to continue to soar. To keep up with inflation, it’s important to start saving as soon as you can. In order to identify the amount you need to save, look into this areas:

Number of years before your child enters university

The longer the time horizon you have to save for your child’s education, the less you have to save per month. To illustrate, this is how much you will need to save on a monthly basis to prepare for child’s tertiary education in the next 5, 10, 15 and 20 years.

*Projection based on AXA Calculator

The intended course of study and number of years

Tuition fees for medicine-related courses would naturally cost more, while non-medicine courses would be less expensive. To simplify things, here’s a summary of the subsidised university school fees in Singapore, based on 3-year non-medical courses:

University Est. Course Fee

for 2020 intake for Singapore Citizens (S$)

Est. Course Fee

for 2020 intake for Singapore Permanent Residents (S$)

NUS 24,600–28,800 34,440–40,320
NTU 24,600–28,200 34,440–39,480
SMU 34,350 48,090
SUTD 39,600 55,440
SUSS (formerly known as UniSIM) 31,440–33,440 (for 4-year courses) 62,880–66,880
SIT 24,570–27,720 49,140–55,440
Lasalle 29,190 40,866
NAFA ~36,000 ~72,000

Credit: Yahoo! Finance

Living expenses your child requires during the course of education

This should include the approximate costs of transportation, books, supplies, meals, living expenses and on-campus accommodation if any. For example:

Description Amount (S$)
SG           SPR           International

Students

Subsidised Tuition Fee for the AY2020-21 cohort (Engineering Programme) 8200 11500 17550
Compulsory Miscellaneous Fees 330 450 450
Hostel Accommodation ($265pm x 12mths) 3180 3180 3180
Meals (Approximate $10 a day) 3600 3600 3600
Books, personal expenses, etc 2700 2700 2700
Transportation (public transport) 1200 1200 1200
Estimated Total Expenses per annum 19,210 22,630 28,680

Credit: NTU Financial Needs Calculator

Inflation

Your savings goal should include inflation in education cost for a more accurate projection. Working with the average amount of S$40,000 required for a tertiary education in Singapore, with an annual inflation rate of 4% a year on average, this would result in S$100,000 in 20 years’ time.

Now that you know the amount you require, work backwards to identify the sum you need to put aside regularly, factoring in the advantages of your savings and its compounding interest over time.

Start investing early

Even if frugality is your best friend, diligently saving S$100,000 in 20 years’ time would be an ineffective way to accumulate this sum, taking inflation into account. Instead, consider investing to enjoy a higher return. It’s never too early to start investing, and we can’t emphasise that enough.

With a number of education endowment plans available in the market, here’s a summary of 4 savings plans that could help achieve your financial goal:

AXA Early Saver Plus Manulife Educate NTUC Gro Junior Saver Tokio Marine Kidstart
Internal Rate of Return (IRR)* Up to 1.57% 2.64% – 3.69% 1.67% – 3.91% 1.59% – 4.08%
Payout Structure Enjoy 2 yearly Guaranteed Cash Benefits of 40% sum assured 2 years prior to the policy maturity, choose your maturity anytime between 10 – 25th policy year Enjoy 2 yearly Guaranteed Cash Benefits before the chosen Payout Age, and 4 yearly Guaranteed Cash Benefits from the chosen Payout Age onwards Enjoy 2 yearly Guaranteed Cash Benefits before the chosen Payout Age, and 4 yearly Guaranteed Cash Benefits from the chosen Payout Age onwards Receive 3 payouts which increase progressively over the last 3 policy years – 40%, 45% and 50% of basic sum assured respectively – fully guaranteed, to help cope with rising inflation and tuition fees
Payment Term 5 or 10 years 10 years 5, 10 years, up till child turns 20/22 5, 10, 15 years
Max Entry Age 60 years old 8 years old 11 years old 8 years old
Flexibility With a max entry age of 60 years old, this plan can be treated as a normal savings plan either for your child’s education or any other financial goals None, payout can only be drawn at age 18 or 20 Smaller payouts available even before University years Payouts can be deposited with insurer to earn interest
Additional Payouts Receive additional payouts (on reimbursement basis) to cover outpatient medical expenses incurred in your everyday life

Guaranteed Cash Payouts in the last 3 policy years

2 (at age 16 and 17) At age 7, 12, 16, and 18 None

Other considerations before you start investing

How are the returns?

Since this investment is for your child’s education fund, your main consideration would be the returns. The returns would also be dependent on the number of years you are investing in. Thanks to the compounding interest, the longer you save, the higher your returns.

Of course, this is not to say that you should simply go with the plan that yields the highest returns, which brings us to the next point.

Do you need flexibility?

Consider whether your child may require the payouts prior to their university years. For instance, there may be a school trip abroad during your child’s secondary school years, which requires extra cash. Perhaps your child might excel in the arts and decide to embark on an overseas tertiary education at a later age.

Ideally, your selected plan should allow for some flexibility so your child can realise his or her full potential during the learning phase.

How long are you able to pay the premiums? 

Saving for your child’s education is a long-term plan that you have to be comfortable with. Consider the amount you can comfortably stash away every month without causing a financial strain based on your current needs, and think about the number of years you are comfortable with paying the premiums.

Safeguarding your family’s financial future

While your child’s education is important, your own financial future matters just as much. Education certainly doesn’t come cheap in Singapore, but sufficient preparation can cushion the damage to your financial health and retirement plans.

Take steps to plan for your child’s future today, so you can have peace of mind during your retirement years.

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