At the end of the education rat race, all Singaporean parents hope that their child eventually does well enough to get into a good university and enrol in a course that ensures a decent future. To that end, parents are willing to fork out big money in tuition fees.
But when your kid has sat the A levels/obtained his diploma, and is about to enrol at uni, you might realise that university tuition fees make private tuition fees look like chump change.
You're looking at paying almost a five-figure sum every year. And if your child does not get into a local public uni, you can forget about taking out a CPF tuition loan.
Sure, there are other options available, like having your child take out a bank loan to finance his own studies.
But many don't want their kids to begin their careers in debt when it's already so tough to make ends meet, which is why Singaporean parents spend an average of $21,000 a year on their child's university education, with over half willing to go into debt for it.
So how are you going to save up a decent university fund for Junior when it already costs so much to raise him? Here are some tips.
1. Start planning early
The cost of university education, especially if your child studies abroad in an English-speaking country, can be as high as that of a home in certain countries.
Just as you need to plan way ahead when buying a home, you need to start early when saving money for your kid's education.
A 2017 survey found that 74 per cent of Singaporean parents start making funding decisions for their children's education even before the kid has started primary school.
The earlier you start, the more you can make room in your budget for your kid's university fund.
2. Work it into your budget now
It might be some 20 years before your kid is ready to go to uni, but you want to start working it into your budget right now.
Saving a small amount over a longer period of time is infinitely less stressful than trying to cough up the entire sum in a few years.
You might have to make sacrifices in certain areas – for instance, you might have to forgo buying your kid the newest iPhone and iPad, or going on lavish family holidays twice a year.
But it's better to make these sacrifices now than to later realise you should have done so.
3. Pay off your high-interest debt ASAP
If you've got any high-interest debt like credit card debt or personal loans that just won't go away, you owe it to yourself and your child to do your best to pay it off ASAP.
Put your family on an austerity drive for several months if you have to.
This debt can make you lose tons of money in interest, and also eventually spiral out of control, which will most certainly put a dent in your kid's uni aspirations.
4. But don't be so quick to pay off your home loan early
On the other hand, when it comes to your home loan, paying it off early is not necessarily better.
If your kid is going to uni just a few years from now, avoid paying off your home loan early if it means you'll have to borrow money to pay for his tertiary education. Home loan interest rates are much lower than education loan interest rates.
Even if university is a long way away, it might still make more sense for you to invest your spare cash instead of using it to pay off your home loan early, since you can probably get a higher return on your investment than your current home loan interest rates.
And don't forget to refinance your home loan at an opportune time-use MoneySmart's Mortgage Refinancing Comparison Tool to find the best interest rates.
5. Invest the money instead of leaving it in a savings account
One of the advantages of starting to save as early as possible is that you'll have the time to invest the money and let it grow.
So come up with a plan to invest your child's university fund over the years. Don't forget to monitor the investment and perhaps move the money to a lower risk vehicle closer to the date when you'll need to use it.
For instance, you might choose to invest the money in stocks and then gradually cash out a few years before the money is needed.
You can then put the cash in a low-risk investment like a fixed deposit in the year or two before your child is ready to go to university.
This article was first published in MoneySmart.