Common questions and my opinions
When should I start the education fund?
Now. As early as you can. The longer period you have, the higher fund size will be available or the lower contribution you need to save to achieve the same desired fund size as compared to if you start late.
How much is the education fund is required?
It depends on various factors. Type of course, where to attend, how long it takes etc. I would say at least in between RM100,000 in 2020 (10 years later) or RM200,000 in 2030 (20 years later)......
How much I need to save monthly?
It is highly depends on your situation. You may start with RM100 per month or RM2,000 per month...... it depends.......you may need to discuss it with your financial planner (or your spouse). Click here if you need the service of a planner.
If you save RM500 into FD per month and earn 3.0%p.a. for next 15 years, you will have about RM113,770
Therefore, it looks like RM500 per month is not a big sum for a education fund.
Where should I put my money in to fund my child's education?
That is why I table out the 5 common ways for your consideration. I prefer to use combination of at least 2 methods and insurance is the must use method due to the nature of protection and high safety of principal with reasonable rate of return (as compared to FD and PTPTN).
Lets compare the pros and cons for first 3 items listed above. Item 4 and 5 are in different category, may be discussed separately in future post.
Cons of the methods
Save in FD and Save with PTPN doesn't give you the protection against the potential major events (36 critical illnesses, total disability and death) that interrupt yours ability to save for next 5, 10 or 18 years.
Save with insurance company requires discipline and long-term commitment as the early termination may be costly (i.e. surrender value < total payment made). It is commonly known as a force-saving method for people to save money for some serious purposes like education and retirement. We called it Serious Money Management.