5 tips to save up for your child’s education fund

Our children are our future. As parents, we have our hopes and dreams to see our children grow up to be successful individuals. One of the ways we can set them up for future success is to invest in their education. This begs the question: how can parents save up for their child's education fund, exactly? Here are 5 useful pointers to guide our fellow parents.

1. Set a realistic target

Set feasible and realistic saving goals for your child’s education fund based on their academic stages:

• Early childhood education – kindergarten and enrichment classes like art classes, music classes, swimming classes, etc.
• Primary & secondary education – private tuition or enrichment classes
• Post-secondary education – junior college, polytechnic/ITE, or university   

That way, you won’t be unnecessarily pressuring yourself to save up for your child’s university education even before they go to kindergarten! Enquire about the school fees of your preferred preschool or kindergarten and then set aside a doable portion from your monthly savings to reach the target amount.

Alternatively, you can also avoid pressuring yourself financially by only choosing to send your children to relevant classes which your children need or can enjoy. This is because enrichment and tuition classes can add up to a hefty amount.

2. Estimate the cost of higher education

Studying at a university involves the biggest financial commitment among all academic tiers (preschool, primary and secondary schooling). On average, the total tuition fee of a four-year general undergraduate degree at a local university is estimated to be S$38,250^*, which is approximately S$9,563 per year for a Singaporean citizen.

However, if your child wants to pursue higher education overseas, parents may want to consider the following breakdown. Here are some of the popular countries to pursue tertiary education:

• Average cost of studying in the UK: approximately S$38,080 per year¹
• Average cost of studying in the US (public university): between approximately S$33,616 - S$47,063 per year²
• Average cost of studying in the US (private university): between approximately S$40,339 - S$60,509 per year²
  
• Average cost of studying in Australia: between approximately S$17,561 - S$39,513 per year³
• Average cost of studying in New Zealand: between approximately S$16,712 - S$20,381 per year⁴

Currency rates are accurate as of 8 August 2023. Please note that these rates may fluctuate and are subject to change without notice.

The average costs above are based on the estimated annual tuition fee borne by a typical international undergraduate student. The average cost may increase depending on living expenses, healthcare, rent, and other factors. Using the above to gauge the average university course cost, it can serve as a general reference to more or less how much to save for your child’s higher education.

3. Prioritise your budget and make regular contributions

Create a monthly budget to ensure that the education fund remains one of the top priorities. It is vital to make consistent contributions during your child’s growing years so that the fund can be sizable enough when it is needed. Choose a steady, regular savings plan that works to build your child's education fund, so you wouldn’t have to deplete all your savings at a go, just to provide for their education. For instance, an endowment plan allows you to accumulate your funds until a lump sum payout at maturity and the flexibility to utilise the regular cash payouts for little luxuries for your family. Raising your child doesn’t have to result in giving up on everything!

4. Leverage with an endowment plan

What is an endowment plan, and how does it help parents to save up for their child’s future education? Endowment policies are life insurance products that are mainly designed for saving money. They help parents grow their savings with potentially higher returns and may allow them to choose a suitable payout age to match their child’s educational milestones. Such plans may allow them to pay premiums for a fixed period of time and receive a payout upon maturity. You can consider GREAT Flexi Cashback or GREAT Wealth Multiplier 3.

If you’re opting for an endowment plan to help create an education fund, it is better to start the plan early. The younger your child is, the longer the policy term can be. Not only are endowment policies used for funding their education, but they can also be used for funding major life events like getting married, buying a house or a car and being a general financial safety net.

5. Re-evaluate and adjust the plan

Parents should regularly review and adjust their education savings plan as the child grows and when the cost of education changes. It is important to be flexible and adaptable to ensure the education fund stays on track. For example, unforeseen circumstances such as job loss or critical illness may affect the savings plan. If this happens — stay calm, re-evaluate and adjust accordingly. You’ll be back on track in no time!

Some insurance plans may not be as flexible as others in terms of premium adjustments. In such situations, it is important to always explore other insurance plans that better align with your specific goals and requirements. For instance, a plan which offers monthly payouts that can double as allowance for your child.

Not sure how to start saving for your child’s education? You may consider GREAT Flexi Cashback from Great Eastern for 3 rewarding benefits:

• Enjoy guaranteed yearly cash payouts⁵ from the end of policy year 2
• Choice of premium terms (choose 10, 15 or 20 years) with affordable commitment from just S$3.29 per day⁶
• Help your child to reach their life goals with potential bonuses at maturity

GREAT Flexi Cashback is a regular premium endowment plan that lets you spend and save at the same time with the guaranteed yearly cash payout component. You can start receiving the yearly cash payouts from the end of the 2nd policy year onwards, or you can choose to accumulate it. Moreover, you can also enjoy greater financial protection against death, total and permanent disability, as well as coverage for terminal illness with this plan.

At the end of the day, saving up for an education fund for your children can be daunting as you may have to scrimp and save every month. But with our GREAT Flexi Cashback plan, parents won’t have to save all the time and they’ll get to enjoy a few little luxuries like taking annual family trips while still saving up for their children’s education fund.

Otherwise, you can take a look at what GREAT Wealth Multiplier 3 can offer. You can:

• Receive multiplied returns of up to 8X or more⁷ of total premiums paid
• Build your legacy to support future generations
• Enjoy the financial flexibility to fund life’s milestones
• Gain financial coverage against death, total and permanent disability and terminal illness
• 100% capital guarantee⁸ from as early as the end of the 15th policy year

It is an insurance plan that builds a savings fund for you and your child’s future. As the owner of the policy, you have the flexibility to decide when and how to utilise the cash value in the policy. You can also transfer the policy to your child subsequently. By doing so, the cash value can continue to grow throughout your child’s lifetime.

Your child is your greatest asset and they deserve the best of everything for their future endeavours. The financial contribution to your little one’s education fund is doable if you plan ahead and explore all the available options, including having money work in your favour through Great Eastern's wealth accumulation plans. Learn more about our GREAT Flexi Cashback and GREAT Wealth Multiplier 3 today!

Footnote:

^* https://smartwealth.sg/school-fees-in-singapore/

¹ https://study-uk.britishcouncil.org/moving-uk/cost-studying

² https://edvoy.com/articles/how-much-does-it-cost-to-study-in-the-usa/

³ https://www.mastersportal.com/articles/1589/study-abroad-in-australia-tuition-fees-and-living-costs.html

⁴ https://www.idp.com/malaysia/study-in-new-zealand/cost-of-studying/

⁵ The guaranteed yearly cash payout is 4.30% of the Basic Sum Assured. Refer to Annual Survival Benefits in policy contract. Terms and conditions apply.

⁶ This is based on annual premium for 15-year and 20-year limited premium payment terms.

⁷ Based on the illustrated cash value at the end of policy year 60, premium payment term of 5 years and an illustrated investment rate of return (IIRR) of the participating fund at 4.25% p.a.. Based on an IIRR at 3.00% p.a., the multiplied returns are up to 4.4X or more.

Potential returns are not guaranteed and are dependent on the premium payment term and policy year when the plan terminates. The actual benefits payable may vary according to the future performance of the participating fund.

⁸ Capital guarantee is on the condition that no policy alterations are made. Capital is guaranteed after 15 policy years for 5-pay and 10-pay. Capital is guaranteed after 20 policy years for 15-pay.

Disclaimer:

This advertisement has not been reviewed by the Monetary Authority of Singapore.

The information presented here is for general information only and does not have regard to the specific investment objectives, financial situation or particular needs of any particular person.

As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid.

You may wish to seek advice from a financial adviser before making a commitment to purchase this product. If you choose not to seek advice from a financial adviser, you should consider whether this product is suitable for you.

Protected up to specified limits by SDIC.

Information correct as at 16 October 2023.