Beginner's Guide to Saving For Your Child's University Fees in Singapore and Beyond
Cheesy as it sounds, I think you would agree that there is nothing like a parent’s love for their children and their desire to provide the best them.
Naturally, this extends to parents providing for your child’s education.
But with the cost of education trending upwards and universities in Singapore largely raising their fees almost every year since 2010 (except for 2019-2020) — it is not going to be easy.
If you are a parent who wants to do the best for your child and wants to provide money for their further education; you will find that you need to be saving money to meet these expenses.
But, when should you start planning for this and what can you do to put aside money for your child’s university education?
We got you!
TL;DR: Beginner’s Guide to Saving For Your Child’s University Fees in Singapore and Beyond
|Local University||Overseas University
|Current Total Cost of Degree|
(Tuition fees & cost of living)
|Projected Total Cost of a Degree in 2040||S$102,000||S$299,400|
Saving for your child’s university education is a long term financial goal that may seem hard to achieve.
But if you start now, you can break down this big financial goal into small manageable amounts that can help you give the best education you can give your children!
Also, when you invest your child’s education fund, you’ll get to pay less in the long run!
When to Start Saving for My Child’s University Education
The answer to this is simple.
The best time to start planning for your child’s education is now.
Even though it may seem a bit kiasu (a fear of losing used to describe a person who is overly competitive), putting aside money now on a regular basis is beneficial.
This is so as it will give you more time for your money to grow due to the magic of compound interest.
Starting early also has the added benefit of breaking down this big financial goal into small manageable amounts to put aside a month.
As such here are some tips that can help you start saving now.
1. Set Aside Your Emergency Fund
Before you start setting aside money for your child’s university fund, be sure to have your emergency fund in place for you and your family.
For the uninitiated, an emergency fund is a sum of money you need for urgent and unplanned life events.
For those with families, this could be anything from a child’s unexpected medical emergency, parents losing their jobs or a sudden need for home repairs.
While everyone’s situation is different, a good gauge will be to set aside an equivalent of 3 – 6 months worth of your living expenses in your high-interest savings account.
That is assuming that you have a manageable amount of debt and have your insurance coverage in place.
If you don’t, do look into them first!
This emergency fund is to prevent you from having to use your child’s university fund when there is an unexpected need for cash.
2. Calculate The Planned Amount
In order to start with your financial planning, you need to have an end-goal in mind.
What is the amount of money that you need to save?
This can be done by having a rough gauge of the amount needed to send your child to his/her dream university.
Knowing your expectations could help in calculating your budget.
Cost of University in Singapore
Now, this is going to differ a lot, since there are so many options that your child can choose from.
But for simplicity’s sake, let’s assume that they are enrolled in a local university and are not taking specialised programmes like medicine or dentistry.
With the MOE tuition grant, an average programme will cost you about S$9,400 per year, along with miscellaneous fees of S$200 per year.
Amount Spent on Tuition Fees & Miscellaneous Fees = S$38,400 over 4 years.
For a more realistic view, we have included a rough estimate of the cost of tuition fees and the costs of living as detailed in the table below.
|Expenses||Amount Spent Over 4 years|
|Tuition Fees & Miscellaneous Fees||$38,400|
|On-Campus Accommodation (1 year)||$3,800|
|Co-Curricular Activities (CCA)||$0|
|Insurance||$1,790 or $1,845
(Through JC or Poly)
|TOTAL||$69,890 or $69,945|
P.S. Check out our article on the cost of raising a child in Singapore.
This will put the total cost of your child’s university education for an average four-year course at a local university at about S$70,000.
But, you will have to factor in inflation, which will more than likely make tertiary education even more expensive in the future.
For example, from 2009 to 2019, Singapore’s average core inflation rate stands at 1.9 per cent according to MAS.
With this estimation of 1.9 per cent per year, we are looking at a projected figure of about S$102,000 or nearly 46 per cent higher (in absolute terms) in 20 years’ time.
If you intend to send your child overseas for further education, this figure would shoot even higher.
Cost of University Overseas
If you’re thinking of sending your child to popular overseas universities in Australia, Hong Kong, the UK, or the US, the fees charged by these universities are noticeably higher.
|Universites||Annual Total Cost of Candidature (Tuition Fees & Cost of Living)|
|S$53,122 - S$64,385|
|S$35,357 - S$39,929|
|UK Universities||S$49,649 - S$71,531|
|US Universities||S$91,369 - S$101,417|
Source: NUS Office of Admissions
After factoring in living costs like student accommodation, living costs and flights the total cost ranges from S$35,537 to an eye-watering S$101,417 per year.
To illustrate this, we will use the median amount of about S$68,500 per year as an example.
This will put the total cost of your child’s university education for a typical three-year course overseas at about S$205,500.
As the interest rate around the world varies, we will use the 1.9 per cent rate for this example.
With this more conservative estimation, we are still looking at a projected figure of about S$299,400 or nearly 46 per cent higher (in absolute terms) in 20 years’ time.
However, everybody’s needs are different.
If you have a clear idea and plan for your child, you could peg the amount you need to save to a specific university for more accurate planning.
Understandably, not everyone will know where your child might end up.
But having this amount gives your child the flexibility to pursue his/her dream university.
You can use the information above as a rough gauge. Do remember to factor in inflation into your calculation! I used this inflation rate calculator in my calculations.
3. Factor in Your Budget and Time Horizon
Now that you have a rough amount, the next step is to determine your time horizon and work it into your budget.
For example, you might have 20 years to save for your child’s university education in Singapore. You will need about $$102,000 in 20 years time.
This gives you 240 months, which means you need to put aside $425 a month for your child’s university education.
However, you might need to make some sacrifices in the short term.
Your children might have to forgo having the latest toys every year or an expensive trip or too. But if you feel that an education is more important, these sacrifices are better made now.
4. Invest to Grow Your Child’s University Fund
Now that you have a budget to work with, it is time to look into where you can put your money to work and take advantage of compound interest.
If you find the amount you have to put aside daunting, investing and taking advantage of compound interest will make this financial goal more achievable.
For example, if you would like to meet the financial goal of putting aside $$102,000 in 20 years for your child’s financial education, you will need to save $425 a month.
The process is made easier with investing due to the investment returns and the magic of compounding!
You will only need to put aside S$350 monthly for 20 years in an investment that gives you a very conservative return of 2% p.a.
Don’t know where to start we have an ultimate guide for investing for ya.
Also, here are some examples of financial instruments where you can put aside money on a regular basis.
If you’re someone who still prefers something with more liquidity, cash management accounts have been on the rise recently offering returns of 0.79 to 2.2 per cent.
The underlying funds for these accounts are the relatively safe cash funds and money management funds. Another comparatively riskier option is to invest in stocks through Regular Shares Savings (RSS) Plans.
Here is where you can invest in Singapore blue-chip stocks or exchange-traded funds like the STI ETF.
P.S. Check out our analysis of the STI ETF here!
For example, the SDPR STI ETF (SGX: ES3), which can be taken as a proxy for the STI, has a 10 year annualised returns of 2.12 per cent p.a. and a dividend yield of 2.12% p.a. (as of 27 July).
This is attractive (assuming dividends stay the same) since bank interest rates are being cut now amid the low-interest-rate environment.
Another option with less liquidity is to put your money into child education endowment plans in Singapore.
These endowment policies are designed specifically for your children’s education. Some of them even spread the maturity payout over the duration of the university.
These endowment plans have rates of about 1.67 per cent to 4.08 per cent p.a. depending on the duration you invest.
Endowments can guarantee a sum of money at maturity (unlike markets where the value can fluctuate due to volatility).
But as with all investments do remember to due your due diligence on the investments to evaluate if they are a sound investment and match your financial goals.
However, in the event that your child so happens to get a scholarship; you would have put aside a great amount for your retirement!
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.