A Dilemma: Child Education Cost versus Your Personal Finance

Child education cost is perhaps the one major life event which will put a dent in your personal finance standing.

I calculated an estimated amount of no less than one third of a million ringgit  based on the future value of money and annual inflation rate of 4%.Mind you, that is just the college costs of one of your children’s tertiary education.We have not factored in all the expenses for raising a child from the day you brought them into this world.

A Dilemma: Child Education Cost versus Your Personal Finance by CF Lieu - Certified Financial Planner Malaysia

The 40+ years old Singapore millionaire teacher and investor, Andrew Hallam who earns a middle class salary is an epitome of frugal living. One important point to note is that he and his wife do not have children.

I am pretty sure that most of us would have a net worth close to a million too by early 40 if we practise prudent financial management, actively growing our money and by not having children. Early retirement, woohoo!

The fact is obviously clear that by not having a child, either by choice or not, is the “catalyst” to financial freedom.

But this is not something I personally would do. While I am not married yet, I could understand that the joy and fulfilment of watching your son or daughter growing up is simply priceless. Having said, there’s a price to pay (no pun intended) for this – and that’ s having to allocate funds to cover for child education costs.

So what are the options?

The most realistic way is to ensure you child performs at least, above average academically in high school. This will enable your child to secure either a private or public scholarship for his or her  university studies. Child education cost is void entirely!

Yes, academic achievement is not the only yardstick of success in adult life. But you know what, it helps a lot – the parents and their child. I can say this because I am walking the talk here – being a former state scholarship award recipient. All my tuition fees were covered by the state government; plus a nominal allowance. That significantly lightened the burden on my parents’ pocket in terms of cost for college.

Then there is this ever popular PTPTN study loan you can apply to fund your education. However, a loan comes with repayment interest, no matter how low the interest is. Study loan is really a bad debt in your later years. If you are an undergraduate, have you ever digested the fact that you already owe the government money even before you earn your first salary? My fellow blogger, Kris, has a very comprehensive write up on why you should reject PTPTN 1% Ujrah loan

I got to admit that public scholarships are still very competitive though – you got to be the creme of the crop. All is not lost, however, as I believe there are a few private scholarships around, offered by corporations like YTL, Telekom, Petronas, IOI, etc. Most colleges have their own allocation of scholarships too, granted based on SPM/STPM/Diploma academic results. Of course, sustaining a certain standard is expected of the students, or else, the grant will be revoked.

If you think you need a second opinion whether you are striking the right balance between your retirement funding and child education, it is always prudent to hire an independent financial adviser.

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