As parents, we always want the best for our children. A happy childhood, a great family environment growing up and all the indulgences of life we can afford them. Above all, we want to give our children the best opportunity to succeed in life as adults – including being able to lead happy lives, find future career success and enjoy financial security, amongst others.
One of the key factors to achieving our aspirations as parents for our children is to provide them with a good educational foundation that will equip them with the right knowledge and skills to help them succeed later in life.
Education the Way to Future Success
Malaysian parents view education as such a critical component to their children’s future success that they are keen to provide extra educational support for their children.Almost nine in ten have either paid or would consider paying for additional tutoring during at least one stage of their children’s education.
In total, nearly two thirds (63%) of parents have paid for additional tutoring at least once during their children’s education. Similar proportions of parents have paid for additional tutoring at primary school level (62%) or for tutors to supplement secondary school education (58%). Two in five (40%) have paid for tutoring for children at university.
A Preference for higher education overseas
Even though higher education overseas is costly, 88% of Malaysian parents would consider sending their child abroad to university, for either undergraduate or postgraduate study. Parents with gross monthly income above RM5,000 are more willing (95%) to send their child to study abroad than those earning below RM5,000 monthly income (86%).
Parents believe the key benefits of an overseas university education include the opportunity to live abroad and to experience different cultures (78%) and becoming more knowledgeable about the wider world (74%), while nearly half believe that learning to speak another language is important.
But an overseas university education does not come cheap. It is not always seen as being within financial reach with 43% of Malaysian parents wanting to send their children to a university abroad but cannot afford it.
Funding the Future
“Parents are willing to make sacrifices to fund their children’s education but there is often a gap between expectation and reality,” says HSBC Malaysia Retail Banking and Wealth Management Head Lim Eng Seong.1
Lim says the key to ensuring you can afford to send your child overseas is to plan and save.1 According to him, parents should start saving early, from the time their children are very young in order to generate additional savings through compound interest.1
Despite the high cost of studying abroad, 83% of parents who are open to the idea of an international university education would consider paying more for it than they would to educate their children in Malaysia. Nearly half (46%) would consider paying at least a quarter more, while 22% would consider paying at least half as much for their children to go to university abroad.
“You must plan to put aside a little bit more (than what you expect) as your child could be staying in university for longer or want to pursue postgraduate studies,” Lim adds.1
There are a variety of areas you can consider exploring to help you in your preparedness to finance your child’s higher education. These include education policies, unit trust funds, fixed deposit and the National Education Savings Scheme (SSPN).2
Numerous financial and insurance companies offer education policies to finance your children’s higher education. These policies generally offer endowment and insurance coverage, providing you with the opportunity to invest in various investment-linked funds based on your risk appetite.2
Unit Trust Funds
Based on your risk appetite and circumstances, there are a variety of unit trust funds you can invest in as savings for your children’s higher education.
A fixed deposit (FD) generally earns higher interest than a regular savings account. By saving in an FD and topping up anytime you get an unexpected windfall, you will be able to build up a savings for your children’s tertiary education.2
National Education Savings Scheme
Introduced by the government through the National Higher Education Fund Corporation (PTPTN), the National Education Savings Scheme (SSPN) offers annual dividend returns of 4% plus other financial incentives such as an annual tax relief of up to RM6,000, matching grants of up to RM10,000 for low-income depositors, and Takaful coverage to all eligible depositors.2
Lim shared that parents should start saving early and not let your plans get derailed1. Parents would need to take into account of the child’s living expenses other than just the tuition fee. The study found that 93% of parents who are expecting their children to go to university plan to contribute to their tuition fees and/or living costs.
The study found that 33% of parents of pre-primary school children who are expecting their children to go to university think they will have to take out a loan, rising to 51% of parents whose children are currently at university who have taken out a loan or expect to have to do so.
Parents who expect to borrow, or are currently borrowing, to pay for university costs recognise the implications, and are expecting to spend on average nine years repaying the debt after their children have finished their education.
According to Lim, one of the benefits of saving early is parents might be able to take smaller loans to fund their children’s education.1 This will help parents repay university debts quicker.
Children Pitching In
For some parents, there is the expectation for their children to contribute to the cost of their own university studies. Twenty percent of parents with a pre-primary school child expect that, once their child reaches university, that child will personally contribute to their own tuition fees and/or living costs. This is consistent with the proportion (21%) of parents with a child at university who say that their child is actually contributing or expected to contribute.
Over half (53%) of parents think their children will save up to contribute towards the cost of their own university education, or say their university age children are using or expect to use their own savings to contribute.
To start your children on the road to contributing to the cost of their university education, you can encourage your children to save for their higher education as well from a young age. By sharing your savings plan with your children and encouraging them to contribute from their pocket money or gifts received during festivals, you can teach your children how to manage their finances from an early age while building their education fund.2
As the cost of a university education continues to rise, parents need to carefully plan ahead to save for their children’s education. And the sooner, the better. If you need assistance to learn more about our products, please talk to your Relationship Manager or visit any of our branches for more insights and information.
Saving Strategies for Your Children’s Education4
If you are already planning to start a family, you can actually start a savings programme even before your child is born. This allows the power of compound interest to work better for you.
Very often, our immediate wants (like upgrading to a bigger car) would take precedence over our longer-term needs (our children’s education). We have to remain focused and disciplined to achieve our long-term goal.
Utilise Various Instruments
Use more than one vehicle to accumulate your funds and the key to spreading out investment risks of a particular instrument is diversification.
You should save consistently and not give yourself excuses to skip saving. Enrol in an automatic savings programme if it works better for you.
The task may be daunting but do not underestimate your ability. What the mind can conceive, it can achieve.
Assess Your Needs
You need to know your financial goal to know whether you’re on track. You also need to constantly keep yourself up-to-date with the latest education costs as they generally rise each year, not forgetting the currency fluctuations as well.
Set Reasonable Expectations
Talk to your children about the family’s finances and set reasonable expectations with them. If it takes too much to save up that RM1 million to send them overseas, advise them earlier that they’ll have to study hard to obtain a scholarship to help cover the cost of studying overseas.
• Sources: 1 The Star Online, Parents Prefer Overseas Education, July 26, 2015. 2 iMoney.my, Save Up for Your Child’s Education Fund Now, September 18, 2014. 3 hsbc.com, International Education, September 10, 2014. 4 Agensi Kaunseling dan Pengurusan Kredit (AKPK), www.akpk.org.my
Reproduced with permission from The Value of Education: Learning for Life, published in 2015 by HSBC Holdings plc.