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How to afford
high education
costs?
Do you know how much you would
need to set aside for your child's
education?
Below is an example of the annual
education cost for Bibi in a local
university.
EXAMPLE OF ANNUAL EDUCATION COST
IN A LOCAL UNIVERSITY:
|
Tuition Fees
|
$6,000
|
|
Food
|
$2,500
|
|
Books / Stationery
|
$1,000
|
|
Transportation
|
$1,500
|
|
Personal Expenses
|
$2,500
|
|
TOTAL
|
$13,500
|
From the above example, a 4-year
university education could cost you
$13,500 x 4 = $54,000.
Using the inflation rate at Chart B,
the cost of a local university education
for your child in 20 years' time will be
$54,000 x 1.49 = $80,460!
Sometimes, the cost of education
may rise faster than the inflation rate.
This means that you will require more funds!
How to afford high education costs?
EDUCATION FUNDING
Some of the options you can consider to save for your child's education include:
- Putting your savings in a bank deposit
- Buying an endowment plan
- Investing in a longer-term investment product
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CHART B
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|
Years
|
Inflation factor
|
|
1
|
1.02
|
|
2
|
1.04
|
|
3
|
1.06
|
|
4
|
1.08
|
|
5
|
1.10
|
|
6
|
1.13
|
|
7
|
1.15
|
|
8
|
1.17
|
|
9
|
1.20
|
|
10
|
1.22
|
|
11
|
1.24
|
|
12
|
1.27
|
|
13
|
1.29
|
|
14
|
1.32
|
|
15
|
1.35
|
|
16
|
1.37
|
|
17
|
1.40
|
|
18
|
1.43
|
|
19
|
1.46
|
|
20
|
1.49
|
|
21
|
1.52
|
|
22
|
1.55
|
|
23
|
1.58
|
|
24
|
1.61
|
|
25
|
1.64
|
|
26
|
1.67
|
|
27
|
1.71
|
|
28
|
1.74
|
|
29
|
1.78
|
|
30
|
1.81
|
|
31
|
1.85
|
|
32
|
1.88
|
|
33
|
1.92
|
|
34
|
1.96
|
|
35
|
2.00
|
|
36
|
2.04
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|
37
|
2.08
|
|
38
|
2.12
|
|
39
|
2.16
|
|
40
|
2.21
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Note: Assuming inflation rate of 2% |
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POWER OF COMPOUNDING
A financial instrument with a higher rate of return can help you to achieve the same goal with a smaller amount of savings every year. And the earlier you start saving,
the more wealth you can grow. However, any form of investment will carry a certain degree of risk.
Do you know that if you want to have $50,000 in 20 years' time, you need to set aside $187.50 per month if you invest in an instrument that gives you an annual rate
of return of 1%? However, if you only start saving 10 years later, you will need to save $395 per month!
So start to set aside savings early. With the power of compounding, even setting aside $100 in your savings account every month (assuming 0.5% interest rate)
could potentially bring you $25,300 in 20 years' time!
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