Save for child's education

Dear Mr. Tan,

I have read comments from many people in your blog. Some people recommended that parents should save for their child's tertiary education. An education is the best gift for your child. Other people said that the priority is for one's own retirement needs. What are your views?

REPLY

The first priority is to have adequate savings for your own retirement needs. You need $200,000 to $400,000 at age 65 to retire comfortably. Do you have this sum?

If you have more than adequate savings, you can set aside the excess savings for your child's tertiary education. The saving can be made in your own account. You can decide on the amount to be set aside for your child's education when the time comes..

You should do a cost benefit analysis for the education expenses. How much are you spending? What additional income can your child earn from the overseas education? What is the payback period? Are there other options to get a more affordable education?

I usually recommend students to study in university in Singapore, as it is highly subsidised. A student can study in an overseas university, if you are on scholarship. Do not spend half of your retirement savings on your child's education. It is not wise.