Education: alleviating poverty or causing it, funding children with retirement fund?

It is not prudent to fund children’s education with your retirement fund

EDUCATION is the social game changer. In poor countries, it alleviates poverty. In developing nations like Malaysia, a more educated population can catapult us to developed status.

Scores of parents are striving hard to send their children to international schools to gain the holistic education, have better choices of tertiary institutions and have access to better paying jobs.

Borrowing future funds

Sending children to international schools is deemed the ticket out of mediocrity in Malaysia and to have a fighting chance in the global job market. But to what end?

Whether it is using EPF savings or selling off property to fund children’s private or international school education, this can be costly to many middle-class parents. While it may be acceptable to borrow funds to ensure our children get better secondary or tertiary education as they can always pay off the loans when they become employed, it is harder to replace “lost” retirement funds.

Therefore, it is not a prudent move to use funds meant for retirement as the fund is most needed when the “parents” are not at income-generating age any more.

Prioritising funds

With today’s Gen X-ers who are becoming parents at later age, we not only have to nurture our children but also care for our ageing parents whilst saving for our retirement. Prioritising investments is key.

1. Be realistic. Parents want the best for our children. If education savings are started early to take advantage of compounding effect, that’s great. If funds only permit an overseas tertiary education, then find the best local education option as our children can still experience holistic learning during university years abroad.

2. Gen Y-er parent, start investing now into a diversified portfolio. It is already too late if you have not started, as the cost of education will only increase.

3. Education is not just about getting the paper qualification. It is about learning. Parents can show kids new ways to learn without busting purses. Take advantage of free online courses like TedTalk or Khan Academy and “experiences” offered by museums, art galleries, nature trips and even playtime in the park.

By CHEONG WAI KUAN, VICE-PRESIDENT OF SUCCESS CINCEPTS LIFE PARTNERS

The writer can be contacted at info@successconcepts.biz / http://www.successconcepts.biz/ The Star/Asia News Network

Related Articles:

Predicament: Retirement or private school fees?

Drought not only drying dams, but also our savings

Save early to meet the big cost of your coming marriage

Modern-day living poses threat to finance, four steps to avoid

Four steps to avoid becoming a burden to your children 

WHEN we were young, people were very careful with their money. Frugality was the order of the day as all available resources was channelled towards just surviving.

Today, our First World problems sound like this: “Should I get the iPhone 5s or wait for the iPhone 6? Such a dilemma!”

I do think that our modern-day living poses a serious threat to our finances. If we do not do something, we may be heading for a personal financial crisis.

Here are four reasons why:

1. LIVING IN EXCESS

Perhaps it is a rejection of our parents’ frugality that we have the need for many things. We are likely to have more than one holiday a year, many expired goods in our pantry, 10 pairs of shoes and a fancier car than our parents.  

2. NO FEAR FOR THE FUTURE

We grew up in a time of plenty with no real threat of war. So there is no need to have "storage" for future calamity. This abundance mentality has allowed people to throw caution to the wind and be totally comfortable spending every sen they have or even what they don’t have.

 3. A RELIANCE ON OTHER'S RESOURCES

There is the safety net of FAMA (father, mother) who will rescue their distressed adult children. How long can FAMA sustain us before their lack of funds become our problem? Also, while EPF is a good retirement vehicle, perhaps it may not be enough to fund your cost of living over the long haul.

4. PRESENT WANTS OVER FUTURE NEEDS

In the 1950s, the lifespan was only a few months after retiring at 55. Now, people are living two decades longer but have not realised the implication of this. They are "enjoying" themselves too much rather than thinking about the future.

If we don ’t correct these four grave financial mistakes, the persons we are today will grow old to become poor tomorrow, dependent and a burden to our children and society. It won’t be anyone’s fault but ours.

Let us plan for the future, so that we will not be woefully unprepared for it.

Contributed by by Amelia Hong

The writer can be contacted at info@successconcepts.biz