Something attracted me to this month edition of “ Young Parent” magazine – “ Got $350k? Yup, it costs that much to raise a kid!…” My first 
thought was… so cheap? Are you sure? On second thought, wow $350k is actually alot of money especially so if i have 2 or 3 children. That will be close to 1 million! How many of us have 1 million to spend on just children?
Good thing my hubby is an expert in the financial line and I have learnt a few things from him… I cannot agree more with the Ms. Bee Leng, head of OCBC Bank, that bulk of the cost is on the child’s education. In 5 to 21 years’ time, a four-year, non medical degree at a local university would cost almost $150,000. Don’t talk about university cost in 5 to 21 years’ time, even pre-school enrichment classes are sooo expensive nowadays. But take heart, as Bee Leng suggested, we can plan early and start saving as soon as our child is born.
Maybe my child can get a scholarship, take a bank loan or borrow from my CPF reserves. But, what if your child is just a step behind the child that was awarded the scholarship? Do you want him to give up the chance of going into university just because he does not have money? Or to take a bank loan and you will then witness him paying off the interest with his starting meagre pay? Or repaying you back into your CPF account?
If you are one of those parents who wish to plan for this education fund since it is within our means and rather not leave it to chance. Then let me suggest a few ways of saving up this fund that we would highly likely need to spend on our child (haha, I believe all of us want our child to make it to the university).
First, like what we did for our child, is to invest in an endowment insurance plan which help us to save. Every month, a few hundred dollars is deducted automatically from our bank account to save into this endowment account. Hahah, this automatic deduction made us more disciplined in our savings into this education fund. An endowment insurance plan has a guaranteed returns and almost no risk with the minimum interest of 3%. Also, we added a waiver of payer benefit that states that in the event I die or strike with critical illnesses, the premium is waived. That is, the policy is still intact even when I discontinue the payment of premium. My child need not forfeit his chance of going into university because the parent is down with cancer. As a responsible parent, I thought I should prepare this fund for him. A gift for my precious son.
What other way some of my friends who have higher risk appetite did for their children is to invest in an investment link insurance (ILP) plan. Why I say that they have a higher risk appetite is because investing in such a plan may not guarantee a fix rate of return. However, as most bought when the child is barely 1 year old, the time horizon for the investment to yield a reasonable rate of returns is sufficiently long and the possibility of a good return is there. In addition, this helps secure an insurance plan that covers the child as long as he lives. An ILP is very flexible, the child can choose to lower the sum assured if he reckons that the sum assured is too high (that is he cannot afford to pay the premium amount since he only start working), the child can lower the sum assured by liquidating the units. Well, there are pros and cons for each plan.
I encourage all parents and all to-be-parents to start thinking about preparing this education fund gift for your child.
