[Advertisement] Preparing for Your Child’s Future Education: 3 Major Mistakes Parents Make

As much as we want our children to stay as babies, they grow up - and they grow up fast. Before you know it, the reality that you have to send them off to school starts looming. 

Many parents put a large emphasis on the importance of education, but the thought of preparing early for schooling fees and such may slip the mind because you’re already spending so much every month on other child necessities such as diapers, milk or clothing. 

All parents want the best for their children but making sure they have everything they need requires a lot of work, and one of the best ways to cover the education costs is to save and invest - if you’re already doing that, that’s great! 

And if you haven’t, it's best you start but before that, there are mistakes parents commonly make when it comes to planning for their child’s education cost. 

Child education in Malaysia

Before we go into the common mistakes, it is best you understand the educational landscape in the country itself and the costs. 

• Preschool (ages 4 to 6)

There are various types of preschools that cover different curriculum including Malaysia’s own curriculum, British curriculum, Montessori education and religious studies. There also may be other types of preschools that conform to more unique curriculum such as the Waldrof/Steinder curriculum which uses a more imaginative approach.  

The average yearly cost for a private, full-day preschool would be around RM7,000. Public preschools are much more affordable, ranging from as low as RM30 and up to RM1,700 per year. 

• Primary school & secondary school (ages 7 to 17)

There are various types of government schools including public schools, vernacular schools and religious schools which are free - if there is a fee, it is generally for the purchase of school-distributed items such as uniforms and textbooks.

However, there are also private and international schools which can range between RM100,000 and up to RM200,000 for standard one until Form 5. Meanwhile, international schools can cost up to RM400,000 to cover all school levels up until Year 12. 

• Tertiary Education (ages 17 and above) 

This refers to higher education above Form 5, or Year 11 that covers Malaysian Higher School Certificate (STPM), university foundation studies, diploma, degree and so forth. Students are able to choose from various colleges or universities in the country, with public and private institutions. 

Fees vary depending on the course the student is pursuing. A full university course can range between RM40,000 and RM87,000, while private institutions can charge from RM26,000 and up to RM87,000 for a non-medical degree course. Medical courses, however, are much more costly from RM600,000 in a public university and RM 520,000 in a private university for the entire duration. 

All these hefty sums are undoubtedly scary which is why saving for your child’s education is crucial. However, these are the three common mistakes which parents tend to make when it comes to building that education fund. 

Mistake #1: Forgetting to factor in the cost of inflation

The figures we listed above are the current figures, without inflation. Many parents forget about the inflation costs and set their goals based on the current costs. However, like other countries, Malaysia has its own inflation rate which varies from year to year. In the past decade up to 2021, the highest inflation rate registered was in 2017, with 3.80 per cent. 

Assuming a yearly inflation rate of 4 per cent, that would mean public preschool could cost RM1,912 (based on the max average cost of RM1,700) in three years. Meanwhile, private school fees could skyrocket up to RM148,024 to cover all levels based on the current lower range of RM100,000. Coupled with tertiary education costs that would be RM56,969 in 20 years, based on RM26,000 as the lowered price course. 

With that, before you start planting money into your savings account or investments, you will need to set your goals accurately and always remember to factor in inflation!

Mistake #2: Planning to withdraw from their retirement fund

There are parents who rely on their retirement funds to sustain their child’s educational costs, especially tertiary education. However, considering the high costs, coupled with inflation, it could lead up to a large chunk out of your retirement fund - this means you will have less to sustain your lifestyle.  

The rule is, a retirement should remain as that - your retirement fund. Remember, this money would be for your own financial comfortability as you will no longer have the regular cash flow once you retire. 

Withdrawing from your retirement fund, such as EPF, should be left at the worst-case scenario which could be not having enough funds to sustain the costs after inflation, or having no savings at all which leads us to the importance of starting early. 

Mistake #3: Starting their savings or investments late

Many parents may put off saving for their child’s education early because of the general rising costs of raising a child. However, although it might give you a little extra every month, starting your savings late may burden you later because, from the figures above, it’s a lot to save up in a small amount of time.

Saving up does not necessarily mean having to allocate thousands every month which is why starting early is great because you can start with small amounts, simply because you have more time before you actually have to fork out the large costs of education.

But simply stashing away a couple of hundred ringgit every month into a simple bank account will be a slow process in reaching your goals, which is why to maximise your returns, you should also look into investment options such as unit trusts, equities and so forth.

We’re not saying putting your money in a savings account is bad, as savings accounts also have interest rates and allow you to take out the money any time.  However, investing is another smart option you can do on top of that to ensure you reach your child’s educational fund goals. 

Investing is definitely not easy as there are various factors to take into account such as what type of investments you should take, what is your risk appetite, how can you diversify your portfolio and more. Many of us aren’t trained as professional investors, which is why there are products that do the work for you - all you have to do is set aside money every month, keep track of your investments as they will invest it for you to potentially maximise your returns.

One of those, which also caters to children is Eastspring Investments Regular Investment Choice (RICh) Fund. 

What is RICh & how can you use it to invest for your child’s education fund?

Eastspring Investments Regular Investment Choice (“RICh”) Fund (“Fund”) is an investment fund which allows you to invest as low as RM100 on a regular basis. The fund seeks to provide investors (you) with long-term capital appreciation. Instead of investing directly into stocks, this fund will be in investing into a diversified portfolio of unit trust funds (or also known as Collective Investment Schemes). 

Here’s a video that easily explains how the fund works:

This might sound like a lot of investment jargon, but don’t worry, the best part of this is that it is managed for you by fund managers for a small management fee. 

You might be skeptical about how a minimal amount of RM100 per month can potentailly reap rewards, but when the markets are uncertain, investing a smaller amount puts you at less risk of loss. Plus, if you start early, you may potentially reap more rewards as the years go by. However, with Eastspring Investments Regular Investment Choice (“RICh”) Fund (“Fund”), you don’t have to worry about the timing of the market as the fund manager will balance out the portfolio for you based on the market movements. 

How can you open a RICh account for kids?

Eastspring also allows children under the age of 18 to invest with RICh Kids. You just need to open a joint regular investment account with your child and invest a minimum investment of RM100 a month (and enjoy 0% sales charge*) - you can also easily keep track of your child’s investment account on MyEastspring - MyEastspring is Eastspring Investments Berhad’s online unit trust investment app that lets you stay in control of your investments. 

If you aren’t the best at regularly investing, you can also set up a direct debit from your account so that it will auto-deduct your desired investment every month. 

If you’re keen on to taking your first steps in investing for your child’s education, visit Eastspring Regular Investment Choice (RICh)’s website for more information or have an Eastpring Trust Consultant get in touch with you to discuss your investment goals.

*The 0% sales charge is subject to terms and conditions. 

Disclaimer

This advertisement is prepared for information purposes only and may not be published, circulated, reproduced or distributed in whole or part, whether directly or indirectly, to any other person without the prior written consent of Eastspring Investments Berhad (“Eastspring”).

Investors are advised to read and understand the contents of the Eastspring Investments Regular Investment Choice Fund (“Fund”) Prospectus dated 9 September 2020 and the Fund’s Product Highlights Sheet (“PHS”) before investing. The Prospectus and PHS are available at offices of Eastspring Investments Berhad or its authorised distributors and investors have the right to request for a copy of the Prospectus and PHS.

This advertisement has not been reviewed by the Securities Commission Malaysia (“SC”). The Prospectus has been registered with the SC who takes no responsibility for its contents. The registration of the Prospectus with the SC does not amount to nor indicate that the SC has recommended or endorsed the product. Units will only be issued upon receipt of the application form accompanying the Prospectus. Past performance of the Fund/Eastspring is not an indication of the Fund’s/Eastspring’s future performance. Unit prices and distributions payable, if any, may go down as well as up.

Investments in the Fund are exposed to collective investment scheme risk, income distribution risk and related party transaction risk. Investors are advised to consider these risks and other risks as elaborated in the Prospectus, as well as the fees, charges and expenses involved before investing. Investors may also wish to seek advice from a professional advisor before making a commitment to invest in units of any of our funds.

Eastspring Investments companies (excluding JV companies) are ultimately wholly-owned/indirect subsidiaries/associate of Prudential plc of the United Kingdom. Eastspring Investments companies (including JV companies) and Prudential plc are not affiliated in any manner with Prudential Financial , Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).

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