Retirement vs Education

Counting the days to retirement or counting your child’s university costs?

Ah, the R word for `retirement’. Isn’t that music to your ears, you think, humming happily to yourself as you contemplate golf on weekdays,

that round-the-world trip you’ve promised your loved ones.

“Oh, hang on, Sam will be sitting for exams and Erin will be applying for universities then….”

Uh-oh. Talk about timing. Two major `biggies’ are turning up at the same time.

Chances are, you will be approaching retirement age when your children are reaching the time to enter university. This follows the trend of marrying later in life among Malaysians.

The published national figures by the National Population and Development Board indicated that the average marrying age for Malaysian men rose from 25.5 years to 28.6 years while that of women rose from 22 years to 25.1 years between 1970 and 2000,

and by 2015, the average marrying age forecast for Malaysians will be at around 33 years old.¹

What this means is that the gap between your retirement and your children’s higher education begins to narrow. And meanwhile, the costs of living and higher education are creeping up, higher and higher.

Earning for their learning

The costs of higher education and especially that of overseas university study fees seem to be getting more expensive each year. For example, the average undergraduate fees per student per year in Australia ranges between approximately AUD15,000 to AUD33,000 (approximately RM44,422 – RM97,728). That does not include the mandatory Overseas Student Health Cover (OSHC).² In the UK, according to HSBC’s report findings, the average study cost per student per year is GBP18,759 (approximately RM100,753). If your child goes to a better-known college or institution of higher learning, tuition fees can be as high as GBP38,532 (approximately RM206,582) per student per year.³

Like most costs of living, higher education costs also take a hike year on year due to inflationary pressures. News report indicate a 3% increase for local higher education fees and 5% increase for oversease higher education fees.⁴ Therefore, it is prudent to plan ahead and factor in the related expenses like board, lodging, travel expenses, tuition fees and other necessary expenses such as student insurance, library fees, books and research.

Hanging on to your own plans or holding up you children’s future?

At this crucial junction, your retirement plans are also chugging nearer as your children’s ambitions are starting up.

As reality starts colliding with dreams and plans, will one get derailed in favour of the other?

Yet which parents do not want the best for their children? If your son dreams of becoming a concert pianist, you’ll be applauding him on. If your daughter yearns to study medicine, you’ll be looking at the best medical colleges.

Then again, how will you be looking at your own retirement in view of your children’s next stage in life? If you are counting on solely your retirement savings to do both, a news report showed:

Only 31% of Malaysian retirees have adequate savings when they retire at 55 years of age and 70% depleted their savings 10 years post retirement.⁵

A recent survey showed that Malaysian parents have high aspirations for their children.⁶ It also identified what they are likely

to spend on which impact their savings and retirement funds. In Malaysia…

42% chose their children’s education as top priority over the rest of household expenditure.

64% considered their children’s education as their best investment as many hoped their children would help them in their old age, and to have brighter job prospects – this meant parents are likely to put away a portion of their savings to achieve their own aspirations for their children.

52% believed a university education is important for future employment.

98% aspired for their children to receive higher education.

64%  believed in the advantages of overseas education.

91% aspired for their children to pursue post-graduate education.

Malaysian parents certainly have lofty ideals for their children’s academic pursuits with many aspire to send them overseas for postgraduate studies.

As living costs and university fees climb, they will simply have to work harder, save more and even consider compromising their own retirement plans.

88% expected to independently fund their children’s higher education

85% relied on their savings to fund their retirement and their children’s fees.

54% relied on current incomes to see their children through university.⁶

85% regretted not saving more. Perhaps they have come to realise how hard it is to keep up with rising costs.⁷

Like every parent, you’ll want to do what’s right for the important stage of your children’s higher learning. But what will be left for you?

Are your retirement plans sitting on one end of the seesaw and your kids’ education plans on the other?

Will this mean sacrificing your own retirement plans for the sake of financing your child’s higher education?

The cost of living is ever increasing which will make future financial decisions tougher than ever. Perhaps it’s time to get off that seesaw, and start to rebalance your financial pivots.

Besides a sensible savings plan, there are several other ways to set your retirement years on a smooth track, such as retirement fund investment, education insurance, asset planning and if you are thinking of sending your child to a foreign university, dual-currency investment.

Ensuring your plans and proposals are relevant in the near future, it pays to refresh the figures and recalculate the math.

Perhaps it’s time to consider another `R’ – your Relationship Manager, well trained in the ways of wealth management and ready to work with you to make better sense of your finances. Together, you can set your course to a meaningful retirement, while happy and satisfied that you can also pay for your children’s higher education.

Sources: 1 The Star Online, “More getting married later or not at all”, March 11, 2010. 2 studyaustralia.gov.au, “Education costs in Australia”, undated. 3 topuniversities.com, “UK Tuition Fees: How much does it cost to study in the UK”, October 29, 2013. 4 The Star Online, “The rising cost of education”, 18 September 2010. 5 theborneopost.com, “Financial and emotional burden of the sandwich generation”, March 17, 2013. 6 “The Value of Education: Springboard for success” Malaysia report. Reproduced with permission from The Value of Education, published in 2014 by HSBC Holdings plc. 7 “The Future of Retirement: Life After Work 2013” Malaysia report. Reproduced with permission from The Future of Retirement, published in 2013 by HSBC Insurance Holdings Limited, London.

Sept 2014