Ways to Save an Education Fund for Your Child without Loan
Four STEPS to create Education Fund for CHILDREN - without borrowing money from the bank or elsewhere.
EVERY parents have dreams to send their children to the best university locally or overseas. In Malaysia, every individual has the opportunity to apply for a loan or scholarship to fund education in the university.
Because of education loan, many graduates struggled to find jobs and pay back the loan. The situation gets worse when they were listed in financial report of CCRIS.
"Central Credit Reference Information System (CCRIS) is a system created by Bank Negara Malaysia (BNM) which synthesises credit information about a borrower or potential borrowers into standardised credit reports."
Meanwhile, scholarship offers are limited, getting less and had to be cut down.
To solve this problem, parents had to prepare the education fund themselves so that they will not rely on loan, borrowing or scholarship.
The following are four ways to create your own education fund for your children:-
1. Research How Much You Need to pay for that Education Fees
Growing like money trees image source
The first thing you need to do is to find out and do a research about how much you need to pay the education fees.
If you want to send you child to overseas university like in the UK, the minimum cost you need to prepare for fees and accommodation is approximately RM125, 000 @ year. If your child needs three years to graduate, the cost will accumulate to RM375, 000.
(If your child is taking medical course, the education fund might be up to RM400, 000 @ year.)
Besides that, you need to take into account that there will be inflation to fees in the future.
✨You may have to prepare RM500, 000 per child as education fund.
2. Fix a Duration of your Savings of the Education Fund
Average age of children to go to the university is 18 years old.
If your child now is 5 years old, you will have 13 years' time to accumulate an education fund until RM500, 000 (if not medical).
3. Choose the Method of Investment.
If you just do Savings - to accumulate until RM500k, it is quite impossible.
Therefore, you may choose investments such as below:-
1. Unit Trust
This investment is ideal for your goal because it has a long term benefit.
Initial Deposit : RM1000
Re-invest every month : RM1,350
Dividend per annum : 12% per year
Duration : 13 tahun
Accumulated fund: RM500k +
Only investing RM1350 per month allows you to accumulate your fund up to RM500k + by the end of 13 years.
2. Property
Property investment is also a good way to accumulate fund. You may have your own property now.
Apartment may cost : RM200,000
After 13 year's inflation : RM350,000
Depending on area
Profits : RM150,000
Thru property investment, you may earn RM150k per unit of the apartment.
However, to purchase a property, the ownership cost might be high, say 15% of the property. You may need to spend another RM30k just to own that property.
The disadvantage is that there is lack of liquidity in property investment. Meaning, the property won't turn into cash easily. Reselling a property may not be as easy as buying.
3. Junior Savings Account and Education Funds
Some banks are offering high interest for children saving account, for 12 years old and below. (Check out Hong Leong Bank Malaysia - this banks gives 10% interests every month!)
Different banks has different rate. It is good to checkout as many bank as you can for your child's future.
Some insurance companies offer education plans, make sure they give you all the details and make an importance of this question: "if I can't pay for the month, how many months can I delay until the company cancels (lapses) my policy?"
4. Start Now
By thinking of your children's education fund, you're already taking the first step. Second step is just to save up and then decide where you want to put your money to let it grow. By then, local universities and colleges are already equipped with great lecturers that can bring your children up to the working world.
Please do give more ideas and comments down here. Thank you. I need more heads and help these young people to further studies and be at their best.
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t is always important that we as parents worry about creating the habit of saving in our children, we can not only teach spending without thinking about the future, we have to educate them in this sense!