If you had just recently got married and starting a family, you would probably be thinking about your child’s education. Now that you have a home and all that you need, it is time to plan for expenses some 18 years in the future, higher education.
Start early to avoid heavy commitment
In the first few years of parenting, your expenses are mostly on the essentials like milk powder, diapers, vaccination and such. You would be planning to buy medical insurance for your child as well. But what about education? One thing for sure, sending your child to public schools would have minimal financial implications but what happens when he reaches the university years? In Malaysia, getting into public universities (which is way cheaper) is not easy so you might need to have some reservations here.
Changing education landscape in Malaysia
In the last 10 years or so, the education industry in Malaysia has changed tremendously. More families are sending their kids to private and international schools from a young which means they will most likely enter private higher education institutions either locally or abroad. While most courses can be done locally, some are still sending their children to Australia, United Kingdom, the US and even Japan and Korea. For comparison:
- A year in the UK in 2000 would cost you about RM20,000 for tuition fees alone. In 2020, this has grown to RM60,000 per year.
- If you are thinking of Australia, the tuition fees would be about RM100,000 while you need to allocate about RM50,000 per year for living expenses.
- The US would be more than RM250,000 if you are to cover tuition and living expenses.
- Locally, a degree at a reputable private university will cost you RM70,000.
That said, how are you going to plan the finances for this?
Financial options for higher education
You have several options when it comes to financing your child’s higher education.
- Scholarships – There are countless scholarships out there like those from JPA (Jabatan Perkhidmatan Awam), banks, corporate companies like Petronas and such. Scholarships mean you do not need to pay them back but they are limited so it might be challenging.
- Loans – PTPTN or Perbadanan Tabung Pendidikan Tinggi Nasional is the most popular public loan you can apply. This is provided through the National Higher Education Fund Corporation that helps to pay for tuition fees. The student will have to start repaying the loans 6 months after they graduate but that would mean they have debts to pay once they start working.
- FDs and other investment engines – You can start building wealth for your child at an early age by putting a sum of money into FD for a long term. The interest might be too low so unit trusts might be your next option. This is also subject to the market conditions in the next 15 to 18 years.
- Insurance-linked plans – This is one of the ideal ways to fund your child’s higher education as it is like a long-term savings policy. This type of plan usually matures after 15 years which is about the same time your child finishes high school. The returns are quite high and they are also quite stable with some form of income and insurance coverage. The earlier you start on this, the lesser you have to pay in premium.
