Get a head start in planning for your children’s education

This article is for information purposes only.

A good education is the foundation of our children’s future, so most parents are willing to spare no expense. However, there are limits to affordability; and starting early is a good way to avoid being tied up in education loans or other debts. While it is not possible to plan for the exact costs – which vary based on field of study and institution – there are some foreseeable elements which parents can plan for.

How much should you prepare to pay?

Education costs will vary based on the place of study, length of study, and the specialisation. However, the following provide some general estimates.

Country	Annual Tuition Fees	Total Estimated Tuition Fees (Four years)
USA	USD 26,290 (SGD 35,754) to USD 35,830 (SGD 48,729)	USD 105,160 (SGD 143,018) to USD 143,320 (SGD 194,915)
UK	£11,000 (SGD 19,807) to £27,200 (SGD 48,978)	£44,000 (SGD 79,229) to £108,800 (SGD 195,912)
Australia	AU 20,000 (SGD 20,213) to AU 37,000 (SGD 37,391)	AU 80,000 (SGD 80,847) to AU 148,000 (SGD 149,567)
Hong Kong	HK 90,000 (SGD 15,697) to HK 265,000 (SGD 46,220)	HK 360,000 (SGD 62,791) to HK 1,060,000 (SGD 184,887)
Singapore	SGD 17,650 to SGD 75,550 SGD 8,250 to SGD 35,000 (Subsidised)	SGD 70,600 to SGD 302,200 SGD 33,000 to SGD 140,000 (Subsidised)

*Currency conversion rate accurate as of 20th April 2022

The tuition fees listed above are estimated rates for international students studying abroad. Depending on your nationality, it will determine the subsidies you can receive. As seen in the Singapore example, if you are a Singapore citizen or permanent resident studying in a local university, you will pay a lower subsidised rate.

Costs will also vary based on the choice of institution. In the United States, for example, a four-year business or economics degree at Harvard University could cost around USD 198,162 (approx. SGD 269,500) in tuition fees. However, a similar course at Massachusetts Institute of Technology (MIT) would cost about USD 292,640 (approx. SGD 397,990).

The cost of studying abroad

When studying abroad, parents need to factor both tuition fees, and cost of living. This can vary significantly even within the country itself.

In the United States, for example, it’s estimated that a student on the east coast may need around USD 1,500 to USD 3,000 per month; but in the south, this can fall to as low as USD 1,000 to 2,000 per month.

The nature of accommodation will also make a significant difference. In Singapore, a dorm room might cost around SGD 600 per month, whilst renting a private residence can range from around SGD 800 (a single room) to upward of SGD 4,000.

Factor inflation rates into education costs

The cost of living increases every year, and this also impacts the cost of education. In fact, the growth in the cost of university education has outpaced inflation for several decades, until the Covid pandemic. As the inflation rate fluctuates every year, we use the average overall rate to predict education costs over the next decade.

For example, assuming 5 per cent inflation rate, an annual tuition fee of SGD 32,800 this year would cost about SGD 53,428 by the year 2032.

As such, parents should plan for an estimated amount based on where their children are likely to enroll for university. For an overseas education, parents might want to track inflation rates appropriate to the given country or state.

Currency exchange rates and an overseas education

Besides inflation, another major variable is currency exchange rates. A sudden strengthening of the foreign currency can result in much higher prices, in a very short span. For example, the current conversion rate between USD to SGD is 1.36 (i.e., USD 1 = SGD 1.36).

A tuition fee of USD 105,160 would thus cost around SGD 143,018. However, if the exchange rate rises to 1.40 (the USD/SGD exchange rate was above 1.40 for sometime during early 2020) just as your child goes abroad, this will raise the same tuition fee to around SGD 147,224, a difference of over SGD 4,000.

Large, unexpected changes in conversion rates can increase your cost. You can mitigate this with Standard Chartered LiveFX platform. It offers an easy way to track currency exchange rates in real time, and you can set alerts and the platform will automatically convert for you when the rates hit your desired level. Besides this, with the multi-currency account, you can conveniently hold different types of currencies in a single bank account, without the hassle of opening a separate account for each currency.

Other unavoidable costs to keep in mind

1. Flight tickets

Some children fly back every term holiday, whereas others may return just once a year.

Having some gauge of the frequency of the flights allows you to estimate the air travel costs you need to consider.

2. Transportation Allowance

Depending on how your child is likely to get around, and whether public transport is available from the university to surrounding areas, the transportation cost will differ.

In some schools, travel expenses are higher as long-distance train rides may be needed to get into the city. Likewise, some cities are not as well-connected by public transport – private hire vehicles or taxis may be required as a form of transport.

3. Insurance and healthcare

If your child has health and life insurance from a local insurer, it is important to check if that coverage applies overseas.

For long-term stays abroad, travel insurance may not be sufficient because most travel insurance plans have a maximum duration of just 180 days. There are overseas protection plans specifically for students, which offer better coverage, and could be more cost-effective in the long term.

For students going to the US, do note that the United States has the highest healthcare costs in the world. Comprehensive coverage, especially for hospitalisation, is vital in this country.

4. Educational materials and equipment

These range from textbooks, to having to replace old or damaged laptops. The cost will vary based on the field of study : music students, for example, may have to spend significant sums on instruments.

Consult the university in question, to find out what your child is expected to possess for their studies. Due to currency conversion rates, it is usually preferable to make such purchases locally and then bring them abroad.

Ways to prepare for your children’s education fund

Save & invest to fill the education fund

1. Decide on the time horizon

Based on the time horizon (when your child is likely to start university studies), you can determine a targeted rate of return.

For example, if you were to invest around SGD 453 per month for 10 years, with five percent returns per annum, you would have accumulated around SGD 70,600; enough to cover the average total cost of Singapore university fees.

Unsure how much you need or how to bridge the shortfall for your child’s education fund? Try Standard Chartered Goals Planner to simulate your child’s education goal and get a consolidated view of how you can meet this and other financial goals. As everyone’s situation and needs are different, discover suitable opportunities for your money and solutions based on your current finances.

2. Diversify into a range of investment and insurance options

Some solutions for meeting the targeted returns include equities or mutual funds – an investment in stocks, or in professionally managed funds.

You can also consider insurance savings plans and endowment plans, which can provide a component of life insurance, while also growing your money. There are several such plans specifically to help prepare for your child’s education. Before you invest your hard-earned cash into any of these products, it is advisable to determine the policy’s return rates and how much money you can comfortably set aside.

Some investors may also seek out other assets such as real estate investment trusts (REITs), gold, and various commodities, to diversify their overall portfolio. A qualified financial advisor can help you customise a balanced mix of different assets – unit trusts, insurance savings plans, and structured deposits among others.

Grants and scholarships

The available grants and scholarships change over time, and are too numerous to comprehensively list. However, even if you are confident that your child can qualify for a grant or scholarship, it is advisable to plan as if they would not.

This is because the grant amounts and eligibility requirements may change, and your children may not be willing to accept certain scholarship conditions for example, 5-years study bonds with certain companies or organisations.

Education loans

Education loans can be used to bridge the gap if your savings don’t cover the costs or you have not been able to save. The availability and interest rates of education loans vary between countries; it is important to know the terms and conditions before picking one.

For example, some education loans do not charge any interest and repayments begin some time after graduation – this means it’s possible for your child to graduate and find a job first, and then help with the repayments.

Some governments offer alternatives to bank loans for education. You can use savings in a government-run pension fund, for the purposes of funding a child’s education (although these tend to be accepted only for local, not overseas, study).

The sooner you start to plan for your child’s education, the longer runway you have to meet this goal comfortably. Speak to your Standard Chartered’s Relationship Managers or visit any of our branches to learn the best way to save and prepare for your child’s education fund today.