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How to Plan For Your Kids' Education Despite the Pandemic

Published 17 Sep 2020

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By Fi Life Team
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We all want to give our children the best education money can buy. But what if money is tight today? In this webinar, we explain how to build a plan to fund your children's education, pandemic or not.

Guests:
Fateen Rosli – Wealth Vantage Advisory - WVA
Lim Hooi Hooi – Coreplus Advisory Sdn Bhd

Moderators:
Roshan Kanesan – Producer/Presenter, BFM Ringgit & Sense
Malek Ali – Founder, Fi Life

Show Notes:
1. Financial planning for education
Hooi Hooi 5:47 11:55 31:58 34:20
- Know your budget from the start
- We must take into account an Inflation of 6 to 8% for overseas education
-Take immediate action to plan early so you can leverage on compounding interest to achieve the targeted amount
- Have a regular savings plan into a portfolio of assets (equities, unit trust, ETF) If the investment time horizon is long, you can go for a more aggressive portfolio
- 5 years before you need the money you can move to a fixed income and stable portfolio
- Property has a risk of liquidity, unless one can plan early or if you don't mind a lower price. Plan earlier, you need 2 to 3 years
- Don't forget to balance against your own retirement plan needs

Fateen 9:04
- With Australian education as the goal. Start investing in Amanah Saham Bumiputera (ASB), after achieving a certain amount then shift to a higher risk portfolio with 8-12% return. Buy condos for children

2. Insurance
Fateen 13:59 25:37
- Past experience - an RM3,000 per year Takaful plan. After 5 years, reviewed the plan and realised only 20% goes to the savings account. The child needs the money at 18 but the maturity date is only at 25 years old. Quickly withdrew from this plan because cash value is not sufficient
- Always look at the appendix, what is the non guaranteed amount, the sum assured and maturity age
- The illustration table will show how much in a year goes to the cost of insurance and the savings account.
- There are still certain endowment plans that are good but dangerous to only rely solely on Takaful plans or education linked plans
- Get an independent advisor to review your plan to ensure the objective is met

Hooi Hooi 21:48
- Certain education linked plans’ payor benefit is 18 years later. Therefore, prefer to buy term and invest the balance
- Term life will pay out the sum assured immediately
- Conventional plan’s rate of return is only at 4-5%, it is better to invest in other assets such as bonds

3. SSPN (National Education Savings Scheme) & PTPTN
Fateen 27:56
- Use SSPN for your children as a tool for tax relief purposes and future PTPTN loan
- Max tax relief is RM8,000 per year per individual, can register online
- 3.75 - 4.25% returns which is just enough to beat inflation but not inflation for education
- PTPTN loan amount isn't tied to savings amount in SSPN

4. How to hedge against Malaysia's depreciating currency
Fateen, Hooi Hooi, Malek 36:43
- Invest in the currency of the country you plan to send your kids to
- The returns of a dual currency account is very low
- Look for investments in that currency, don't just buy that currency. Example, invest in a US ETF as a natural hedge if you want a US education
- You can also be buying property overseas
- may become a source of rental income and save on accommodation cost

5. Alternative education plans
43:19 56:24
- Look for the best local university option, twinning programs, apply for scholarships (there are many options for non-english speaking countries), work part-time while studying
- Communicate well regarding the compromise required
- Having hardships allow your children to experience life (self-financing or partial financing their own education
- University is not everything. You can always work first then study. Employers not only look at standard university qualifications but rather the candidate’s personal experiences