- How Much Do You Need to Save for Children Higher Education?
Children's Education Planning
Impact of Inflation Inflation does affect the education fund tremendously. The above is based on current rates. Depending on the rate of inflation and the period that your child will go to college or university, the amount could be even higher.The longer time inflation is allowed to take hold, the higher will be the cost will be, hence the higher the education fund is needed. That's why there is a need to plan for a child's education plan as soon as possible. See the chart above on the inflation impact on the currency When should you start planning for a child's college education? Ideally, as soon as the child is born. The cost of four years at a private college or university currently is increasing faster than our inflation rate. Don't become alarmed if you haven't started planning for your child's college education. No matter what the child's age, strategies are available to help you come up with the necessary funds. You can use the our Education Planning Calculator to estimate what how much is needed for your child's education and how much money you should be investing now to be able to meet those needs. For young children, start putting money away regularly now, investing in higher-potential-growth securities and mutual funds as you would for other long-term goals, such as retirement. As your income increases, try to increase the amount you're investing. When a child reaches high school age, you'll probably want to begin moving college investments into lesser-risk investments. How to Plan for Your Child Education Fund Children and their education are extremely high priorities for many families. Many are aware that it can cost a fortune to support their children especially for higher education. The cost of higher education has increased dramatically in the recent years. This can result in a tremendous financial drain for a family with college age children. How Much is Needed? Generally, the following costs will be needed - tuition fees, books & supplies, travel costs of child including costs of travel of parents & family, and accommodation & food. You can estimate how much is needed using our education planning calculator. a) Tuition Fees The cost of tertiary education can knock a sizable hole in your savings! Check the overseas courses fees at Study Malaysia.com b) Living expenses, books, travel costs If the child is sent overseas, it depends on where. The costs of living expenses, books and travelling also vary significantly. For popular destinations like UK, living expenses can be GBP 8,000 per year. This approximates @ 5.14 to a cost of RM41,000 per year. For Australia, living expenses can be A$10,000 per year. At an exchange rate factor of 3.0, it can cost RM30,000 per year. For this economic reason, many Malaysian parents send their children to study in Australia even though the preference is to study in UK. Check out the international exchange rate calculator at Exchange Rate.com |
What Financial Aid is Available?
These are some of the possibilities of financial aid available:
Government Scholarships
Through the Public Service department, the Government offers scholarships to eligible students. The number of scholarships offered are limited and there is keen competition for these scholarships.
Corporate Scholarships
These are offered by some large corporations and institutions. The competition to win such scholarships is high and only the better scholars are selected. The scholarships often come with bond to work within the corporation following graduation.
Private Foundation
Some private foundations offer scholarships. These institutions can be set up by family trusts, philanthropists or established corporations. Generally, there are conditions attached to such scholarships. Again, the competition is tough to win the award.
University Scholarships
Some universities offer scholarships to overseas students. Usually only the best scholars have chance to win such awards.
Government Loans
For the fortunate few, there can be Government loans. Generally, priority is given to students from lower-income families. The competition to win such loans are stiff as it is usual for more exceptional scholars to have a winning chance.
Bank Loans
Such loans are possible however most ask for asset collateral, such as properties or stocks, to support the money given out. The interest rate charged can vary with the bank. It is very common to pay between 1.5% to 2% above current (BLR at 6.6% p.a.) base lending rate for these loans.
What other financial options are available to generate money for education?
Apart from cash withdrawal, through proper planning it is possible that the parent could have some investment made earlier years. Such investment could be the other financial options available to the parent when required. Another most common option is that of financing the child from family savings. One of the sources is the withdrawal from the EPF savings when the contributor reaches 55 years old.
Another possible source and better solution would be from education plans. This allows you to withdraw funds when your child reaches certain ages such as 18 or 21 years old. One significant advantage of such plan is that should the contributor die or be totally and permanently disabled, the future payments due until the plan matures are immediately waived. The beneficiary will receive the benefits as defined in the plan, i.e., the child's education fund is secured no matter what happens.
How does the age of the child affect the strategy to save and invest?
It is generally agreed that parents should start the education fund planning as early as possible. This will be able to maximize long-term returns. The younger the child, the more time you have for compounding to help grow your money.
For example, if you started with RM1,093.00 per month insurance saving plan or unit trust plan in before or when your child is born or today is the best time, and the interest earned in your investment is assume at 8% per year. If the same rate carries on year after year without the principal balances of each new year being touched, then the compounding effect comes into effect. Thus. By Year 15 the amount will be RM380,900 in 15 years for your Child's Education overseas cost.
For example : The S&P 500 Index Principal Protected Plan offers guaranteed min 140% returns on principal upon maturity or based on the last S&P 500 index. Assume you saving min USD500.00 p,m or RM1,652 p.m. for 15 years based on S&P 500 index, the principal protect guarantee returns minimum of USD126,000 or RM416,108 for 15 years or you will get more than the stated min 140% matured account value or higher account value depends on the S&P 500 index on maturity date. ( A sample S&P 500 Index Plan illustration for a client intends to save USD2000 per month for his son to enter a tertiary education for engineering course plus costs of living in USA is attached, the client desire needs for an Education Planning at least USD550K to USD750K at end of 15 years maturity period. )
Education plans should have the following features:-
There are three 3 ways to fund your child's education plan:
Personalize your financial plan for Education
Investors Trust gives you the flexibility of meeting all or part of your children’s educational needs. By working with your financial advisor, you can tailor one of Investors Trust’s plans to suit your goals. We know you want the best for your children. You work hard to make sure they have the finest in life. A quality education is the foundation for your child’s success. It is the best gift you can give your children.
Have you thought about a way to assure their future? Do you know what the difference between a High School education and a College Education can mean for your children? According to the U.S. Census Bureau, a child with a college degree earns almost double the amount that he or she would with only a high school diploma, and obtaining a Professional Degree would mean an increase of 300%! The costs of a higher education are rising every year. On average, College tuition increases about 8% per year, meaning that the cost can double every nine years. It is important to establish a sound financial plan in order to meet these rising costs. Recommended the 15 years option regular savings plan based on S&P 500 index Principal Protected.
This S&P 500 Index Principal Protector plan is guaranteed 140% at maturity returns or total matured account value whichever is higher plus loyalty bonus of 7.5% in year 10 and year 15 and a life insurance coverage of 101% of the Account Value in event of relevant death.
Assuming a 8% rate of inflation, a college that costs USD 10,000 a year today will have the following costs in the future
Check out the education costs : https://www.investors-trust.com/eng/savings.html
Insurance Education Plan
Insurance education plan's features normally have payor benefits. One significant advantage of such plan is that should the contributor die or be totally and permanently disabled, the future payments due until the plan matures are immediately waived. The beneficiary will receive the benefits as defined in the plan, i.e., the child's education fund is secured no matter what happens. Another advantage of using insurance education plan is the tax deduction. For instance - AIA E-Rich Max Education Insurance Savings Plan for children.
Education Planning through Unit Trust
However, if you choose to mixed funds your child education by investing in unit trust, remember to complement it with an equivalent term life plan, so that should the payor die or become incapacitated, the there will still be a fund for your child to continue pursue his or her education dream. The investment portfolio must also be monitored closely and rebalanced every year, so that as the child's age grows closer to his or her tertiary education age, the fund should be rebalanced to more conservative portfolios. Check out the Education Planning in Public Mutual Bhd
Conclusion
There is absolutely no right or wrong way of saving for a child’s education. But then, nobody did say that planning an investment strategy for a child’s education is easy either. What is generally agreed by financial planners is that parents need to take action – the sooner the better. The concept of saving plan is based on the dollar-cost averaging. The investors are advised to invest regularly to lower the average cost per unit.
If planned early, an investment fund for educational needs as a relatively long-term objective, and it is set up with the hope that the fund will not be needed in the meantime. Therefore, a less conservative investment vehicle seems justified in order to secure a more attractive investment yield. Generally, it would be unwise to speculate too aggressively, and the college fund should be just sufficient without being excessive.
Proper risk management is also very important. If parents die, the child may not even be assured of an education. Hence it is very important to safeguard the child's welfare should either one or both parents die or become incapacitated. And this can be safeguard through the a plan which incorporates proper risk management - such as an education plan. The earlier you start your child's education fund planning, the more secure the funds will be when your child reaches tertiary education age.
These are some of the possibilities of financial aid available:
Government Scholarships
Through the Public Service department, the Government offers scholarships to eligible students. The number of scholarships offered are limited and there is keen competition for these scholarships.
Corporate Scholarships
These are offered by some large corporations and institutions. The competition to win such scholarships is high and only the better scholars are selected. The scholarships often come with bond to work within the corporation following graduation.
Private Foundation
Some private foundations offer scholarships. These institutions can be set up by family trusts, philanthropists or established corporations. Generally, there are conditions attached to such scholarships. Again, the competition is tough to win the award.
University Scholarships
Some universities offer scholarships to overseas students. Usually only the best scholars have chance to win such awards.
Government Loans
For the fortunate few, there can be Government loans. Generally, priority is given to students from lower-income families. The competition to win such loans are stiff as it is usual for more exceptional scholars to have a winning chance.
Bank Loans
Such loans are possible however most ask for asset collateral, such as properties or stocks, to support the money given out. The interest rate charged can vary with the bank. It is very common to pay between 1.5% to 2% above current (BLR at 6.6% p.a.) base lending rate for these loans.
What other financial options are available to generate money for education?
Apart from cash withdrawal, through proper planning it is possible that the parent could have some investment made earlier years. Such investment could be the other financial options available to the parent when required. Another most common option is that of financing the child from family savings. One of the sources is the withdrawal from the EPF savings when the contributor reaches 55 years old.
Another possible source and better solution would be from education plans. This allows you to withdraw funds when your child reaches certain ages such as 18 or 21 years old. One significant advantage of such plan is that should the contributor die or be totally and permanently disabled, the future payments due until the plan matures are immediately waived. The beneficiary will receive the benefits as defined in the plan, i.e., the child's education fund is secured no matter what happens.
How does the age of the child affect the strategy to save and invest?
It is generally agreed that parents should start the education fund planning as early as possible. This will be able to maximize long-term returns. The younger the child, the more time you have for compounding to help grow your money.
For example, if you started with RM1,093.00 per month insurance saving plan or unit trust plan in before or when your child is born or today is the best time, and the interest earned in your investment is assume at 8% per year. If the same rate carries on year after year without the principal balances of each new year being touched, then the compounding effect comes into effect. Thus. By Year 15 the amount will be RM380,900 in 15 years for your Child's Education overseas cost.
For example : The S&P 500 Index Principal Protected Plan offers guaranteed min 140% returns on principal upon maturity or based on the last S&P 500 index. Assume you saving min USD500.00 p,m or RM1,652 p.m. for 15 years based on S&P 500 index, the principal protect guarantee returns minimum of USD126,000 or RM416,108 for 15 years or you will get more than the stated min 140% matured account value or higher account value depends on the S&P 500 index on maturity date. ( A sample S&P 500 Index Plan illustration for a client intends to save USD2000 per month for his son to enter a tertiary education for engineering course plus costs of living in USA is attached, the client desire needs for an Education Planning at least USD550K to USD750K at end of 15 years maturity period. )
Education plans should have the following features:-
- Education fund at child's college age -- which allows you to withdraw funds when your child reaches certain ages such as 18 or 21 years old.
- Payor benefit (should either one or both parents die or become incapacitated, the plan runs by itself)
There are three 3 ways to fund your child's education plan:
- 15 years Regular Contribution on S&P500 Index Principal Protected Plan in Investors Trust Offshore Investment
- Insurance Education Plan - Enrich Max Savings in AIA Bhd
- Mixed Unit Trust Funds as Education Planning in Public Mutual Bhd
Personalize your financial plan for Education
Investors Trust gives you the flexibility of meeting all or part of your children’s educational needs. By working with your financial advisor, you can tailor one of Investors Trust’s plans to suit your goals. We know you want the best for your children. You work hard to make sure they have the finest in life. A quality education is the foundation for your child’s success. It is the best gift you can give your children.
Have you thought about a way to assure their future? Do you know what the difference between a High School education and a College Education can mean for your children? According to the U.S. Census Bureau, a child with a college degree earns almost double the amount that he or she would with only a high school diploma, and obtaining a Professional Degree would mean an increase of 300%! The costs of a higher education are rising every year. On average, College tuition increases about 8% per year, meaning that the cost can double every nine years. It is important to establish a sound financial plan in order to meet these rising costs. Recommended the 15 years option regular savings plan based on S&P 500 index Principal Protected.
This S&P 500 Index Principal Protector plan is guaranteed 140% at maturity returns or total matured account value whichever is higher plus loyalty bonus of 7.5% in year 10 and year 15 and a life insurance coverage of 101% of the Account Value in event of relevant death.
Assuming a 8% rate of inflation, a college that costs USD 10,000 a year today will have the following costs in the future
Check out the education costs : https://www.investors-trust.com/eng/savings.html
Insurance Education Plan
Insurance education plan's features normally have payor benefits. One significant advantage of such plan is that should the contributor die or be totally and permanently disabled, the future payments due until the plan matures are immediately waived. The beneficiary will receive the benefits as defined in the plan, i.e., the child's education fund is secured no matter what happens. Another advantage of using insurance education plan is the tax deduction. For instance - AIA E-Rich Max Education Insurance Savings Plan for children.
Education Planning through Unit Trust
However, if you choose to mixed funds your child education by investing in unit trust, remember to complement it with an equivalent term life plan, so that should the payor die or become incapacitated, the there will still be a fund for your child to continue pursue his or her education dream. The investment portfolio must also be monitored closely and rebalanced every year, so that as the child's age grows closer to his or her tertiary education age, the fund should be rebalanced to more conservative portfolios. Check out the Education Planning in Public Mutual Bhd
Conclusion
There is absolutely no right or wrong way of saving for a child’s education. But then, nobody did say that planning an investment strategy for a child’s education is easy either. What is generally agreed by financial planners is that parents need to take action – the sooner the better. The concept of saving plan is based on the dollar-cost averaging. The investors are advised to invest regularly to lower the average cost per unit.
If planned early, an investment fund for educational needs as a relatively long-term objective, and it is set up with the hope that the fund will not be needed in the meantime. Therefore, a less conservative investment vehicle seems justified in order to secure a more attractive investment yield. Generally, it would be unwise to speculate too aggressively, and the college fund should be just sufficient without being excessive.
Proper risk management is also very important. If parents die, the child may not even be assured of an education. Hence it is very important to safeguard the child's welfare should either one or both parents die or become incapacitated. And this can be safeguard through the a plan which incorporates proper risk management - such as an education plan. The earlier you start your child's education fund planning, the more secure the funds will be when your child reaches tertiary education age.