Sunday, December 08, 2013

Education is expensive, what must you do for your children?

Published: Monday December 9, 2013 MYT 12:00:00 AM
Updated: Monday December 9, 2013 MYT 8:08:04 AM

Education is expensive, what must you do for your children?

MY son who studies in a local Chinese school is “losing” his friends.
By next January, 10 of his friends will be in international schools.
Why the exodus?
Parents seem to consider western-styled education to be more nurturing environment for learning, which is an attractive pull.
Push factors include deteriorating standard of English, lack of holistic learning setting and closed-minded education policy.
Surprisingly, the exodus is happening despite the high cost of international schooling.
Parents who send their children to government schools, pay between RM200 and RM500 half-yearly and can even save on buying textbooks from “skim pinjaman buku” (book loan scheme).
In contrast, parents whose children attend international schools fork out RM12,000 to RM98,000 a year in fees, books, uniforms, building fund and various charges.
So, how do parents fund such expensive education? Today’s parents must start saving the moment little bub joins the family, or say sayonara to international schools.
Best to start with at least 10% of one’s income if there is time to accumulate.
Otherwise, the funds need to grow faster or more needs to be saved.
What are your options?
* Build equity in property?
Investing in property to pay for kids’ education is a popular option. Is it the best option?
NobelLaureate in Economics, Robert Schiller, said “spending on shelter is consumption, not an investment.”
He listed volatile price for a single house (or in Malaysia, stagnating prices), paying too many fees to the bank, property agents and lawyers, and illiquid nature of property as reasons it is not the best investment.
* Save via insurance plans?
The disciplined manner of paying premiums builds up your fund.
However, should one lapse in this disciplined “savings” for an extended period, the savings plan can become unsustainable.
The returns may also not be sufficient to hedge against the rise in education costs. Moreover, the cost of this type of savings can be high. 
* Invest in unittrust funds?
Regular savings into growth type of funds can yield capital appreciation in the medium to long term and allows for flexible and additional investment.
Whilst capital can grow faster, the investment is exposed to market risks. Thus it is vital to work with a financial buddy to achieve this goal.
The ability to “save” continuously, funds’ availability for investment and liquidity are keys to a priceless yet pricey education.

No comments: