How Best to Plan for Your Child's Future

- 1 in 25 locals in 1990 to 1 in 10 in 2000 get a university degree
- you may like to send your child to a prestigious school for that added edge in life

Start Early
- start early to reach your financial goals is key
- a 3-yr non-medical degree course at a local tertiary institution costs $58.119 will cost $93.190 in 18 yrs (includes tuition fees and living expenses)
- in Australia, $117,684 now will cost $258,531 in 18 yrs
- in Britain, $151,866 now will cost $418,758 then
- in US, for 4-yr course, $291,512 now will cost $793,686 then

- your home is the largest investment you will make, and raising a child comes a close second
- start saving for your retirement first before saving a child's education
- cover all current liabilities and living expenses should you be unable to work first
- without insurance, education costs may not be the top priority
- local workers aged between 20 and 64 are under-insured by as much as $525 billion nationwide
- average person needs about $495k life insurance, but most are only covered for about 1/3 of this sum ($165k)

Work out a Plan
You may like to ask the following questions:
- Are you planning for your son or daughter? If it's your son, then you'd have 2 extra yrs to save (assuming he serve NS).
- What kind of education do you want your child to have?
- Where will he/she study?

- most popular alternative to savings in a bank (interest rates are significantly low) is an endowment plan
- an endowment plan yields about 3-5 % returns and comes with coverage against death and illnesses
- eg.if you like to save $200k in 20 yrs, you may need to save $595.30 per mth under an endowment plan. This guarantees $109k upon maturity and $94,108 non-guaranteed bonuses (your child will receive $203,018).
- returns are lower than investing in a unit trust
- investments come risks
- with longer time horizon (with dollar cost averaging), the ups and downs balance out and investing can boost your savings
- may invest with an insurance-linked plan to diversify your portfolio

Beyond Education Savings
- hospitalisation should be the first policy you should get for your child
- MediShield covers an 80% of your large medical bills in Class B2 and C wards
- Basic coverage for newborns and youth are about $30/yr
- half of the local youths under 20yrs old are not yet covered
- another insurance plan is life plan, covering premature deaths, disabilities or a list of critical diseases
- life plan policy should be low on parent's priority list

Other options
(A)
- CPF study loan interest at 2.5% (cheapest loan)
- repayment starts only  after student graduates
- max loan is 40% of your OA balance
- loan only available to full-time govt subsidized diploma or degree
- repayment can be made in one lump sum or mthly installments over a max of 12 yrs

(B)
- Education loan from bank can fill up the gap between CPF loan and savings you have
- interest rates at 6% and processing fees of about 3%
- can borrow up to 6-8 times of your mthly gross income, with cap of $150k
- may have to be paid during course of study

(C)
- tuition fee loan with no income requirement
- max loan is 90% of MOE's subsidized tuition fee for entire course of study
- interest rate during course of study is at 4.75%
- some courses of study are excluded