Funding For Your Child’s Education
Many at times, people are troubled about how they should plan for their child education in the future. This is especially true for those parents who are looking at sending their children for a oversea education. With inflation going as high as 6.6%, the risk for not planning is way too high for people to handle.
With that in mind, parent should really start to plan how they are going to solve this problem. It’s better to do it now than keep holding back because the longer they wait, the more they need to set aside every month for the same amount.
Here are some ways to fund your child’s education:
1. Endowment plans. These are regular saving insurance policies with a fixed maturity date. The returns are higher than bank savings account, and therefore can provide a good chance to finance the child’s entire education. That is, however, if you do not terminate earlier than the maturity date. Some plans also allow you to withdraw some emergency fund if necessary.
2. Unit trusts. A diversified good portfolio can ensure returns higher than endowment plans, but they are much more risky. Also, it does not come with insurance, unlike an endowment plan. Regular investment takes advantage of the dollar cost averaging strategy and it can generate returns between 5%-12% over long period of time.
3. Central Provident Fund (CPF) Education scheme. The maximum amount that can be loaned is 40% of the Ordinary Account. Repayment starts after graduation or leaving from course of study, at an interest of 2.5%, over a maximum of 12 years. For the Ordinary Account fund, most would be used for housing purposes and therefore not many people may have enough to set aside for education.
4. Bank loans. Education loan is one of them. It is a way to loan whatever you need after calculating your available funds. Take note this is an expensive loan with interest rates as high as 6% and a processing fee of 3%. You may only borrow 6 to 8 times your monthly salary, up to a cap of $150,000.
Tuition fee loan (Bank) allows the student to borrow up to 90% of the course of study. This is after the subsidy for local students by the Ministry of Education. This loan is interest-free during the course of study. The only requirement is that you need to have a guarantor above the age of 21.
Overseas Student Program is another type of bank loan, reserved for students of local universities who are taking an overseas student program as part of their course. Application for this program requires the approval of the student’s university. It is also interest free in the course of study and has a rate capped ay 4.75% per annum, just lie the Tuition Fee Loan.
5. Scholarships may cover 80% to 100% of tuition fees. However this scheme is only available to very few students, and may depend on their course of study. There are some scholarships that also provide for hostel stay and other living expenses.
6. Bursaries are grants for needy students. In Singapore, the amount ranges from $750 to $6,000 and application are considered on a case-by-case basis.
This list is not exhaustive. In fact, how you want to fund education can only be limited by your own creativity.
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