Have you ever wondered what are the things you need to consider for your children’s education? Find out here on what and how you should think about it.

Thinking about your children’s future is always stressful. It is already overwhelming, balancing between a career and family life. Can you imagine stressing about your children’s future also?

These stresses are ultimately motivated by your innate desire of wanting the best for them. All parents want their children to be better than them just like how every generation wants the next one to be even more successful than the last.

The tried-and-proven way to do this is by education. Education has advanced so much that almost every millennial now has a degree. It is a far cry from the generations before that, where most only finished secondary school.

Hence, it is so important to plan your finances to provide the best ever education to your children. Find out below what are the things that you need to consider.

Consideration #1: How much you are earning now and in the future

It is important to consider the income you are making now and how much you are expecting to earn in the future.

For many Malaysians who are in the B40 and M40 income groups, you need to plan around the income you are expecting to make to ensure that you have enough to get the best value for your children’s education.

After all, the cost of education in Malaysia is getting more and more expensive. Education in Malaysia could cost an estimated RM38,000 a year for a university education, and parents are spending almost half of their income on their children’s education.

However, you don’t know how to start thinking about how much are you expected to make in the future. After all, you are already struggling to make ends meet. What more the future?

The stress is compounded by the profession that you chose in the beginning of your career. Not all jobs pay equally and if you are in a profession that doesn’t pay well, it is hard to switch when you are in it.

To make this consideration easier, you can first ask yourself how much did you earn 5 years ago and compare it to now.

For example, if you earned a monthly salary of RM3,000 5 years ago compared to RM4,000 now, your salary would have grown at a rate of 5.9%. You can check how much did your income grew by going to this calculator and filling in the details.

Next, you can use that growth figure to project your income moving forward. For example, 5 years from now, you will be earning about RM5,328 per month if your income grows every year by 5.9%.

If you are not feeling confident on using your income, you can use official hard data on income to do it. According to the Department of Statistics Malaysia, a typical median family’s monthly income grew from RM4,585 in 2014 to RM5,873 in 2019, or a growth of 5.1% every year.

No matter how much income you are making, it is always better to be realistic about your income prospects and plan around it. Go ahead and engage a licensed financial planner to get started on your children’s education.

Consideration #2: What your children are interested in

This is probably not an easy topic to discuss with your children on what they intend to do with themselves in the future.

After all, you want them to be able to do what they like but also be realistic about the need to support themselves and their future family.

Similar to the consideration of the income you are making, it is important to discuss early on what your children want as a career. This is because education cost varies depending on profession. A degree in business definitely does not cost the same as a degree in medicine.

According to the tuition cost compiled by Education Malaysia, depending on the degree specialization, expect to spend from a range of RM24,360 to RM697,305 for a degree in Malaysia.

A degree that cost RM24,360 is already expensive for you. Imagine a degree that cost more than RM50,000 or RM100,000 and you have 2 to 3 children. Can you see why now that it’s important to properly discuss with your children on what they want to do?

This situation is compounded by the increasing difficulties for people looking for a job without a degree, and this hits the B40 households harder. Most companies now are setting minimum requirements of having a degree for most of their entry-level positions. However for some of the B40 households, they are even forgoing an education after secondary school to come out and work to support their families.

You will also need to consider the amount of time that an education will take. A degree in medicine typically takes around 5 years in Malaysia, while a business degree will take around 3 to 4 years. Depending on the length of your children’s education, you will need to properly plan your cashflows around it keeping your other financial commitments in mind.

Have that difficult conversation with your children now, and work with them to fulfil what they want to do in life. Engage an education consultant to further explore options for your children.

Consideration #3: The education path of your children

After figuring out your expected income in the future and what your children intends to pursue later in their life, the next step would be to plan the education path of your children.

Ask yourself the following questions first when you are planning

  • How much can and should you set aside for your children’s education from kindergarten until university?
  • Considering your income, should you put your children through the public or private education path?
  • How important is it to get overseas education exposure?

For the majority of Malaysians, you are tied down to numerous financial commitments such as housing, car, insurance and many others. Your children’s education is another big financial commitment for you, and most probably take centerstage in your children’s development into an adult.

You want to set aside as much money as possible for your children’s education from kindergarten to university to ensure that they get the best out of it. The first step is to be aware that education cost typically increases with education level.

While it is always better to put more into your children’s education fund, if you are unsure on how much of your income you should put into education, you can use the threshold obtained from Department of Statistics Malaysia’s Survey on Household Income and Expenditure Survey as a guide.

An average household in Malaysia spends about RM70 per month or RM840 per year on education. The total amount spent on education has also been on an increase where in 2010, an average household spends about RM372 per year on education.

The question of public vs private education depends on the tradeoff between cost and quality. Public education is considered much more affordable, while private education is much more expensive.

The trade-off lies in the quality of education offered. Class sizes are bigger in public schools, while private schools have smaller class sizes. Research from the National Education Policy Centre in University of Colorado puts forward the hypothesis that increased class size could harm student outcomes and test scores.

However, you should not look too much into the difference in quality between public and private education, but rather the value your children will get from them. In Malaysia, some of the best students came from the public school system. Aina Zainatul Zakirah Ismail was Sabah’s top scorer in the SPM examination 2019, and she came from SMK Agama Kota Kinabalu. She is also one of only two students in Malaysia that are now undergoing a 6 months exchange program in Arkansas, United States.

While studying overseas used to be the domain of the more well-off households, more and more universities in Malaysia are offering the twining option for students. This means students can choose to study in Malaysia for one to two years and complete the remaining of their degree overseas.

It is worth considering the twining option for your children as overseas experience will prove to be beneficial in providing a different perspective.

Consideration #4: Education funding

All the considerations above will lead you to think about how to fund and invest your money for your children’s education.

If you are thinking that you have to fund your children’s education all by yourself, you are mistaken. There are lots of other funding sources that you can take advantage of for your children, namely scholarships and education loans.

For scholarships, you can consider the following institutions and companies

You can also explore student loans such as PTPTN (Perbadanan Tabung Pendidikan Tinggi National or National Higher Education Fund) that offers very generous interest rates. Generally, PTPTN loans have lower than market interest rates, some even have only 1%. PTPTN is also designed to help ordinary Malaysians with lower incomes.

However, it is much more reliable to start saving and investing your money now into appropriate education investment funds. The Ministry of Higher Education is running two education savings fund called SSPN-i and SSPN-i Plus.

As with all financial commitments, you can’t plan your savings and investments for your children’s education without also taking into account other commitments. Start by engaging a licensed financial planner and education consultant now to better prepare for your children’s education.

In the meantime, you should also probably discuss about the agreement on who is paying for higher education. You might have different thoughts of teaching your children the lesson of financial commitments if they also pay for their education.

Conclusion

It is always hard to think and plan for your children’s education. From the cost of education to what your children wants to do, it is no wonder most Malaysians find it so hard to even start thinking about it.

Start by seeking help from your friends, education consultant or a licensed financial planner. Then, seek to understand how much income are you expected to make, what interest does your children want to pursue, which education path is the most optimal and how to properly fund your children’s education fund. Education remains the tried and tested method to improve everyone’s livelihood.

 

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