This article was first published on the 7th of April 2019 and has been updated on the 10th of January 2022.
In the more recent years, the state of the economy has been fluctuating in an unprecedented manner that it has become even more important to have a steady amount of savings, especially for your children education fund. This is to ensure that you and your family’s wellbeing are protected not only in the present, but also in the future.
We are quite fortunate as a nation where public schools have been made accessible to many, even to those in the lower income levels. The problem however, arises when speaking of higher education. Although student loans, subsidies and scholarships do exist, it is undeniable that higher education is a costly investment, especially when striving for overseas education.
Therefore, it is wise for parents to start saving for their children’s future early on. This is also a good practice for parents to teach children on the importance of saving money, which is an essential financial skill that will undoubtedly benefit everyone.
Having said that, let us dive into the several options available in Malaysia for parents to save for their children’s education, slowly but steadily.
1. Savings Account
Tips to select the most suitable bank to open a child’s savings account with:
- Bank location: Select a nearby location, or choose the same bank as preferred by the parent(s).
- Fees and requirements: Choose an account that does not charge a monthly maintenance fee or require a minimum balance. Avoid banks that charge a fee for inactive accounts and carefully read every term and condition before opening an account.
- Type of savings account: If the parent/parents’ preferred bank does not offer accounts that are suited for children in terms of its fees and requirements, check with your local credit union. Credit unions usually charge lower fees as they are member-owned.
- Age requirements: Based on the child/children’s age, there may be different needs for the savings account. Consider what will the savings account be used for when choosing the bank and type of account to be opened.
- Special benefits: Ask if there are any special programs for children at your preferred bank. These may be beneficial for your children.
- Interest rate: Do not forget to check for the interest offered on the account as this will differ across banks.
- This account type is very easy to open (according to each bank’s policy, might only need as low as RM1 to open an account)
- Savings accounts offer interest that will be paid to the depositor. Although this interest is quite low, it still allows for the savings to grow, rather than saving traditionally at home.
- Can be withdrawn any time. This is useful for times of emergencies. Some accounts also offer issue debit cards that can allow any transactions to be monitored online.
- The safety of your deposit is guaranteed. For every bank that is registered with PIDM, all savings are protected and insured for free (up to RM100,00 for each account). Therefore, make sure that you only conduct transactions with registered institutions.
- Offers lower interest than other saving methods.
- Your children may be tempted to withdraw their money prematurely, especially if they own access to the account.
2. Amanah Saham Bumiputera 3-Didik
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.
3. Fixed deposit accounts
Consider investing in Shariah-compliant fixed deposit accounts for more significant returns.
This way, not only can you earn returns on your principal, you can also set aside an amount for your emergency fund. Many local banks now offer Shariah-compliant fixed deposits.
Of course, selecting the bank to open this investment account with is not easy. You will have to carefully survey and compare the terms and conditions, and choose the one that best aligns with your needs and will offer you the best returns.
4. Tabung Haji
For Muslim Malaysian citizens, this can be a valuable offer. Once the savings in your child’s Tabung Haji reaches RM1,300, which is the minimum amount required for registering for pilgrimage under this subsidised scheme, you can register their name to be in the queue for pilgrimage.
Some of the benefits of saving in this fund is that all deposits are 100% insured by the government, eligible for tax exemption, and are automatically deducted for zakat payments.
There is also no limit to the amount of deposit and Syariah-compliant.
5. SSPN-i Plus
The National Higher Education Fund Corporation (PTPTN) introduced its 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.
6. Amanah Hartanah Bumiputera (AHB)
This is a Syariah-compliant unit trust fund that invests primarily in commercial properties in prime locations within Malaysia. It is aimed to provide positive and consistent income flow to Bumiputera investors.
This fund also offers a junior account option for children aged 3 months to 18 years registered under a legal guardian’s name.
This means that you can start investing in property for your children with a minimum investment as low as RM100. Property investment can earn lucrative rewards, especially after investing for a long time.
It is also affordable, with a fixed unit price of RM1.00.
The downsides of AHB are limited unit availability, returns that are not reinvested, limited agents and only open to Bumiputera citizens.
7. Unit trust
The COVID-19 pandemic is a great lesson for us to realise the importance of saving money. ‘Normal life’ can be turned around massively in a matter of days, all the more reason for us to start saving for emergencies.
Improving the financial literacy of all family members is a learning process but it can really pay off in terms of maintaining everyone’s wellbeing. Continue the effort to maintain the family’s financial situation by learning more on the best platforms to save up for retirement. As the Malay proverb goes: “Sikit-sikit lama-lama jadi bukit.”
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