5 Ways to Save for Your Children Education - Direct Lending

5 Ways to Save for Your Children Education Fund

It is every parent’s dream to watch their child walk across the stage, proudly wearing the graduation robe, to receive the scroll that certifies him or her a graduate. However, we all know that a tertiary education is costly.  Even though Kuala Lumpur was listed as one of the most affordable cities for students in 2018, the average cost to pursue an engineering degree at a local private university is still a whopping amount of RM 51,000 (equivalent to USD $16,000). With inflation, that same degree will cost more than double that amount 20 years from now.

Hence, it is important to start saving today to ensure that your child will be able to enjoy top-notch education when the time comes. Below are the 5 ways to save for your child’s education.

Source: edubilla

1. SSPN-i Plus

Source: sspniplus-online

The National Higher Education Fund Corporation (PTPTN) introduced its newest savings scheme in 2012, SSPN-i Plus. The plan is basically an education savings plan attached with Takaful life coverage. The dividend declared for 2018 was 4%, which is higher than most fixed deposit accounts. In addition, you can claim up to RM6,000 in tax relief for the scheme, and an additional RM6000 for life insurance coverage, if you have not already exhausted that with tax reliefs from your own EPF or life insurance coverage.

2. Children’s savings account or fixed deposit accounts

Source: Investor Square

If your child is below 18 years of age, another option is to open a junior savings account or a fixed deposit savings account with your local bank. The interest rates for both these accounts can vary between banks, so be sure to do your research on the interest rates that are being offered by the banks before depositing your money there.

The plus point for opening a junior savings account is that banks like Maybank and OCBC offer cash rewards if your child performs well in major examinations such as the UPSR, PT3 and SPM. Other banks like Affin also offer free personal accident coverage for your child. Besides that, this is also an opportunity for you to educate your children on the importance of savings and encourage them to get involved in contributing to this savings account.

3. Education plan offered by an insurance company

Source: Tradition Capital Management, LLC

Most, if not all life insurance companies also offer education plans that offer a combination of both savings and insurance coverage. Similarly, do your research and shop around for the various different policies before settling on one. Ensure that you purchase a policy that has a pay or benefit rider, where the premiums will be waived if an unfortunate circumstance that results in the death, total permanent disability or diagnosis of a critical illness of the policy holder, parent or legal guardian of the child. This is one way you can have total peace of mind that should anything happen to you, your child’s education fund is protected.

4. Amanah Saham Bumiputera 3-Didik

Source: ASNB

For all Bumiputeras, opening an Amanah Saham Bumiputera 3-Didik account is a savings plan that could benefit your children. You can open an account for as little as RM100. Since its launch in 2001, the dividends have never dropped below 6%. If your child is between 6 months to 18 years of age, you can open an ‘Akaun Bijak’ on behalf of your child. This account can be converted to an adult account when your child grows older­­. The fund is managed by Amanah Saham Nasional Berhad, a wholly-owned subsidiary company of Permodalan Nasional Berhad.

 5. Unit trust

Source: Medium

For the non-Bumiputeras, fret not! Consider investing in education planning programmes. These are generally funds that are of low to moderate risk, as they are long-term in nature. Shop around different fund providers and select a fund that fits your risk appetite, providing a satisfactory return.

In a nutshell

In case your child is about to start tertiary education soon, and you do not have enough time to invest in the above options, there are other options that you can turn to. For example, if your child has been excelling in both academic and extra-curricular activities in school, he or she can attempt to apply for scholarships such as the JPA scholarship, the Star Education Fund, and other scholarships offered by various organisations in both the public and private sector.

There is also the option of applying for education loans. One could also opt to apply for a loan from PTPTN, withdraw from EPF, apply for aid from cooperatives like KOJADI, or secure an education loan from the bank. The options are endless.

As you can clearly see, there are various ways for you to ensure that you are prepared to finance your child’s education in the future. Be sure to study each option carefully, and invest in more than one plan to diversify your risk. It literally pays to start investing in these programmes early on! The earlier you start, the more options and benefits you stand to gain. As the Malay proverb goes: “Sikit-sikit lama-lama jadi bukit.”

Follow our blog for more money saving and personal finance tips. This article is prepared by Direct Lending – a fast, simple and safe online personal loan platform for civil servants and private workers in Malaysia.  Check your bank and koperasi loan eligibility for free in case if you need a personal loan to finance your child’s education.

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