Efficient Ways to Finance Your Child's Education

Efficient Ways to Finance Your Child’s Education

Are you getting ready to plan for your child’s college education? Regardless of the program that he/she will be following, the certainty of the issue is that your child will need a sum of money to get him/her through university.

While the children are still young, we may think that going to university is still a long way off. However, financial planners tell us that the earlier we plan for our children, the better it will be.

In the paragraphs below, I will try to discuss some common questions raised by parents……

How much money is enough?

While a university education is a head start for our children, going to an expensive university is not the only way that our children can succeed in life.

In fact, my experience of sending my three children through universities always tells me that our children should live simply and even work part time to supplement their pocket money in the university.

Living simply and working part time is always good for our children for the following reasons:

·        Children learn to budget and appreciate sacrifices that their parents have lovingly offered to them.

·        Children learn good values of living frugal lives.

·        Besides learning from the books and their professors, working part time also brings in a whole host of valuable experiences that children can learn from.

·        Children learn to become more responsible when they earn their own pocket money.

·        If they are working on a part time job that is related to their field of study, they will have an impressive portfolio by the time they graduate. This will help them to get a good job upon graduation.

In my counselling sessions with parents, I have always advised them to get ready a sum of money that the family can afford to provide for every member of the family equally without too painful a consequence.

Your children must know that they are to use this sum of money responsibly. Once this sum of money is used up, then he/she would have used up all the resource allocated.

Planning for college is also great fun for the family. It can become an interesting family project. The tuition fees and living expenses for university can be a 10 year project for the family.

Rather then setting our hearts on an expensive university and raising funds for it, families should just set a reasonable and achievable budget for themselves and look out for good universities that the children can go to within this budget.

I know of a family with three children. One day, it suddenly dawned on the parents that the children are growing up and will need extra resources to go to college. In order to raise extra funds for the children to go to their dream universities, both parents began to take on a second job. Eight years passed and the children have all graduated from their universities. But the parents have become old and haggard. They have sadly neglected their own rest, health, exercise and nutrition to send their children through college……

It does not have to be done this way…….

Saving for college should be planned early, involving the whole family (including the children). Both parents and children can also be realistic about the college budget and work happily to realise their plan. You may ask…..

How early should I save?

You should save as soon as you are able. I started saving for my children’s education when they enter pre-school.

My husband and I took a small job on Saturday mornings to earn a little extra for the family. Very soon, we have enough to put a small sum of money aside to buy a little property. We rented out the little house to help us pay for the monthly instalment……

When our eldest daughter went to college, we sold the little house to support her. Today, she is a Global Marketing Manager of an international petroleum company. The investment that we put into her is money well spent.

I have three children. For each of them, I did the same thing. God has blessed my investments. All three of my children are able to go to college without a lot of hardship to the family.

You may think that it is a lot of difficulty having to save for so long. But I can tell you that it is great fun. Children also learn that they should save for the future. It is excellent financial education for our children.

The last thing that we want is to bring up spoilt and presumptuous children who don’t know the value of money. ….

Saving together for the future as a family will also bring the members closer together. Children will also learn at a young age to be frugal, to save and to live a life style within their income level. These are all good values that will benefit them for a life time. Plus, your children will watch their family’s savings grow and develop into a big sum of money to provide for their education.

But you might ask …….

How can I grow my saving?

Invest wisely. I invested in houses for my children because it is what I know how to do.

However, some people have invested in houses but the investment did not turn out well. All investments carry risks. Investment in real estate is not necessarily a formula for high returns. You need to study the location, price range and your own ability to make the monthly instalments.

Some people invest in stocks and bonds. In order to ensure all your investments are sound, talk to an expert who can help you decide…

It is best to make sure that you have the amount that you are saving for your child three years before he/she is due for college. Keep your money safely for these three years so that there will be no anxiety when the time comes to use it.

If you need professional help, you can consult a financial planner. However, you may ask again……

Is it worthwhile to invest so much money?

While we look at education as giving your child a head start in life, we should still plan well and spend wisely.

How do we know we plan well for our family? We know we plan well when every member of the family is at peace and there is harmony and love between each member of the family.

This can only be achieved if every member of the family is treated equally. There should be no favouritism. Every resource is put on the table and shared.

I have heard of parents who justified an uneven distribution of resources by saying that one child is smarter and “deserve” to take a more expensive course. This act of favouritism has caused many family members to suffer unnecessary hurts and pain. Spending so much money, and yet inflicting pain on each other is just wasteful and unwise.

Planning well means looking into all these issues and motivating every member of the family to work together with peace and joy in their hearts. It also means that over the years from the time when the family begins to save and invest their money, to the time when the children are ready to go to college, each step is watched over by every member of the family. Can you imagine the financial learning that will take place throughout these years? And the best thing is that it is free…..

Coming back to the amount to invest, my advice is always to prepare an amount that you are comfortable with, making sure that every member is given an equal amount.

Education cost ranges from USD$10, 000 to $50, 000  a year or even more. While we may want to send our children to the best university, spending $50, 000 a year on one child when your family expenditure is $80, 000 a year is just unreasonable and unnecessary.

Spending for education should be wise and depending on affordability. Remember, more expensive doesn’t mean better. Plan wisely and be happy.

But yes, it is worthwhile to spend the money. Investing in our children’s education is always money well spent. However, spending money for education is just like spending money for anything else. We should always spend money that is within our means, within our budget and spend wisely.

Other Sources of Help

Besides support from the family, your child can also look at scholarships, financial aids and students’ loan to see him/her through university.

In US, most students will always receive some form of scholarships based upon their grades, areas of interest, athletic abilities and background. A good website to visit will be www.collegescholarship.org.

If your child is studying in US, he/she can also work for a maximum of 20 hours a week on campus. He/she can apply to his/her faculty for jobs on campus. My children have been working as waiters in the campus cafeteria, assistants in the library, tutoring in their senior years, etc. If your child is working outside of his/her campus he/she will need a work permit.

Most places like UK, Australia, New Zealand, Malaysia and Singapore will also allow your child to work part time with his/her student visa. However, he/she will also need to apply for an immigration clearance. He/she can ask the university to help him/her apply for one.

Most banks also allow your child to apply for a student loan. However, I will advise you not to apply for too big a loan. Many students have taken a big loan to go through university and in the end; they have to spend the next 10 years paying off the loan.

I know of a parent who has guaranteed a USD$150,000 loan for his son for a medical degree. Half way through the course, his son found that being a doctor is not what he wants to do. He can no longer back out of the course because of the loan. He spent the next 10 years working in a job that he dislikes because he has taken a big loan. Ten years is too long a time to be so miserable!

If you have no other alternatives, just take a small loan. But my advice is always for you to work at other options first.

Let’s Work Together

I have been working for 35 years in the field of education. I have seen many students grow up to fulfil their destiny and to make us proud.

I have counselled countless parents who are looking forward to seeing their children succeed in life. Let me help you in planning for your child. If you need help in any way, please contact me at siewhua@edugate.com.my. I will be pleased to help you.