However, many Singaporean parents are concerned on the raising prices of education. This is why parents are encouraged to initiate a thorough financial planning that touch upon the education needs of their children. As your child’s education progresses to the next stages, the tuition fee would likely be higher.
As a parent, what can you do to ensure that you will have enough funds to fulfill the education need of your child? In this post, let us dig deeper into the available ways of saving or investing funds for your child’s education.
With the interest rate offered in a typical savings account not being able to catch up with inflation, many parents are worried on the decreasing value of their money in a savings account. Hence, we may feel the need to invest the money somewhere else, where it can retain or even gain values over time. Some instruments that are usually considered include purchasing stocks, mutual funds and exchange traded funds.
In an investment plan, you are usually required to set aside a sum of money on a frequent basis, such as at every month. From such investment, you would expect to receive dividends or returns that you could use to reinvest or cash out. However, you need to take note that these options come with a higher risk compared to a regular savings account, and it varies depending on the investment instrument. The common thought for people engaging in these activities is that with higher risk comes a higher return.
Bonds
If you are willing to engage in a ‘less risky’ investment activity, you may want to consider investing in bonds. Unlike in buying stocks or shares from the open market, this lower-risk investment vehicle usually does not allow one to cash out in the short term. And just like any other investment, it is highly recommended to buy different types of bonds to strengthen and diversify your bond portfolio. When you diversify your bonds, the risks are spread across different baskets.
Endowment plans
Endowment plans is generally a combination of a savings and an investment plan. They are usually much better in term of return as compared to a regular savings account in a bank. When the endowment plan you choose reaches maturity, you can expect to enjoy a cash pay out.
The advantage of an endowment plan is that it is usually modest and thus low risk. Nonetheless, endowment plans typically require a long-term commitment, generally for more than 10 years. Hence, it is advisable to plan well and spare enough money to cover the entire years of commitment because if you decide to terminate early, you may lose some money. Scour the internet for details on the different endowment plans that are available, including their advantages and disadvantages.
Final Note
While the examples provided here are by no mean exhaustive, the point is that you should start investing for your child’s education as early as possible by exploring the different options available. This is motivated by the believe that education is important for one’s future.
Choose an investment method that you believe will best serve your child’s education need, your capability as well as risk profile. And before embarking on an investment journey, one may realize that whichever option you choose, it is best to understand thoroughly about it and if possible, consult with a trusted financial professional.
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