Education Fee PlanningAAM making the grade

Making the grade for your child’s education

A good education is an investment in your child that will have a permanent benefit. However, it requires careful planning and thought.

The annual fee at an international school in Singapore varies from around $14,900¹ to over $55,000², and that’s before the inevitable extras such as school trips, books and music lessons. Even more dispiriting, the cost of a full-time, three-year course at Singapore Management University, including tuition and living costs, can cost nearly $188,000³.

With planning, you can invest to provide the means for the best education for your children. The key is to start planning early.

Funding from capital

Tax-efficient investments can be used to maximise the return on whatever capital you have saved for your child’s education. The younger your child is, and the further from needing the funds, the more investment risk you may be able to assume, and thus increase potential growth.

As the time you need to use the funds approaches, you may consider moving them into more conservative investments, to help preserve their value. Careful monitoring of the investment will ensure that the money is available when tuition is due.

Example 1

Mr and Mrs Jones plan to send their daughter Emily to university in 15 years’ time. The University fees are currently $50,000 per year. Adjusted for inflation at a rate of 5% per annum, the cost of a three-year university course in 15 years’ time will be $311,839.

To have $311,839 in 15 years’ time, assuming investment returns were 5% per annum, Mr and Mrs Jones would need to invest $150,000 today.

Funding from income

Many parents do not have the capital to invest for the future and so must use their income to build an education fund. One way to invest smaller amounts regularly is through unit trusts. These are pooled investment funds that give access to a wide spread of shares, and other securities such as bonds.

As with funding from capital, the length of time of the investment and attitude to investment risk is key to successful planning.

Example 2

If Mr and Mrs Jones were to save regularly to build the fund of $311,839 needed to pay for their daughter’s University education, again assuming investment returns were 5% per annum, they would need to save $1,173 per month over the next 15 years.

Seek advice and prepare early

As education fees are increasing all the time, the sooner you start planning the better. Contact an AAM Advisory Wealth Manager today to discuss your investment goals for your children’s education.

Whatever you do, don’t put this off. Delaying your education savings plan by just one year can have a dramatic effect on the end sums.

 

¹ https://www.xwa.edu.sg/admissions/school-fees/#

² https://resources.finalsite.net/images/v1611042228/sas/em1udshqjkuca4pshewv/2021-22FeeScheduleRefundPolicy.pdf

³ Fees based on an international, non-subsidised student.

 

 

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