As much as we want our children to stay as babies, they grow up - and they grow up fast. Before you know it, the reality that you have to send them off to school starts looming.

Many parents put a large emphasis on the importance of education, but the thought of preparing early for schooling fees and such may slip the mind because you’re already spending so much every month on other child necessities such as diapers, milk or clothing.

All parents want the best for their children but making sure they have everything they need requires a lot of work and one of the best ways to cover the education costs is to save and invest - if you’re already doing that, that’s great!

And if you haven’t, it's best you start but before that, there are mistakes parents commonly make when it comes to planning for their child’s education cost.

Before we go into the common mistakes, it is best you understand the educational landscape in the country itself and the costs.

Preschool (ages 4 to 6)

There are various types of preschools that cover different curriculums including Malaysia’s own curriculum, British curriculum, Montessori education and religious studies. There also may be other types of preschools that conform to more unique curriculums such as the Waldrof/Steinder curriculum which uses a more imaginative approach.

The average yearly cost for a private, full-day preschool would be around RM7,000¹. Public preschools are much more affordable, ranging from as low as RM30 and up to RM1,700 per year².

Primary school & secondary school (ages 7 to 17):

There are various types of government schools including public schools, vernacular schools and religious schools which are free - if there is a fee, it is generally for the purchase of school-distributed items such as uniforms and textbooks³. However, there are also private and international schools which can range between RM100,000 and up to RM200,000 for standard one until Form 5⁴. Meanwhile, international schools can cost up to RM400,000 to cover all school levels up until Year 12⁵.

Tertiary Education (ages 17 and above):

This refers to higher education above Form 5, or Year 11 that covers Malaysian Higher School Certificate (STPM), university foundation studies, diploma, degree and so forth. Students are able to choose from various colleges or universities in the country, with public and private institutions.

Fees vary depending on the course the student is pursuing. A full university course can range between RM40,000 and RM87,000, while private institutions can charge from RM26,000 and up to RM87,000 for a non-medical degree course⁶. Medical courses, however, are much more costly from RM600,000 in a public university and RM 520,000 in a private university⁷for the entire duration.

All these hefty sums are undoubtedly scary which is why saving for your child’s education is crucial. However, these are the three common mistakes which parents tend to make when it comes to building that education fund.

The figures we listed above are the current figures, without inflation. Many parents forget about the inflation costs and set their goals based on the current costs. However, like other countries, Malaysia has its own inflation rate which varies from year to year. In the past decade up to 2021, the highest inflation rate registered was in 2017, with 3.80 per cent⁸.

Assuming a yearly inflation rate of 4 per cent⁹, that would mean public preschool could cost RM1,912 (based on the max average cost of RM1,700) in three years. Meanwhile, private school fees could skyrocket up to RM148,024 to cover all levels based on the current lower range of RM100,000. Coupled with tertiary education costs that would be RM56,969 in 20 years, based on RM26,000 as the lowered price course.

With that, before you start planting money into your savings account or investments, you will need to set your goals accurately and always remember to factor in inflation!

There are parents who rely on their retirement funds to sustain their child’s educational costs, especially tertiary education. However, considering the high costs, coupled with inflation, it could lead up to a large chunk out of your retirement fund - this means you will have less to sustain your lifestyle.

The rule is, a retirement should remain as that - your retirement fund. Remember, this money would be for your own financial comfortability as you will no longer have the regular cash flow once you retire.

Withdrawing from your retirement fund, such as EPF, should be left at the worst case scenario which could be not having enough funds to sustain the costs after inflation, or having no savings at all which leads us to the importance of starting early.

Many parents may put off saving for their child’s education early because of the general rising costs of raising a child. However, although it might give you a little extra every month, starting your savings late may burden you later because from the figures above, it’s a lot to save up in a small amount of time.

Saving up does not necessarily mean having to allocate thousands every month which is why starting early is great because you can start with small amounts, simply because you have more time before you actually have to fork out the large costs of education. But simply stashing away a couple hundred ringgit every month into a simple bank account will be a slow process in reaching your goals, which is why to maximise your returns, you should also look into investment options such as unit trusts, equities and so forth.

We’re not saying putting your money in a savings account is bad, as savings accounts also have interest rates and allow you to take out the money any time. However, investing is another smart option you can do on top of that to ensure you reach your child’s educational fund goals.

Investing is definitely not easy as there are various factors to take into account such as what type of investments you should take, what is your risk appetite, how can you diversify your portfolio and more. Many of us aren’t trained as professional investors, which is why there are products that do the work for you - all you have to do is set aside money every month, keep track of your investments and they will invest it for you to potentially maximise your return.

One of those, which also caters to children is Investments Regular Investment Choice (RICh) Fund.

Eastspring Investments Regular Investment Choice (“RICh”) Fund (“Fund”) is an unit trust fund which allows you to invest as low as RM100 on a regular basis. The Fund seeks to provide investors (you) with long-term capital appreciation. Instead of investing directly into stocks, this Fund will be in investing into a diversified portfolio of unit trust funds (or also known as Collective Investment Schemes).

This might sound like a lot of investment jargon, but don’t worry, the best part of this is that it is managed for you by fund managers for a small management fee.

You might be skeptical about how a minimal amount of RM100 per month can potentailly reap rewards, but when the markets are uncertain, investing a smaller amount puts you at less risk of loss. Plus, if you start early, you may potentially reap more rewards as the years go by. However, with Eastspring Investments Regular Investment Choice (“RICh”) Fund (“Fund”), you don’t have to worry about the timing of the market as the fund manager will balance out the portfolio for you based on the market movements.

Eastspring also allows children under the age of 18 to invest with RICh Kids. You just need to open a joint regular investment account with your child and invest a minimum investment of RM100 a month (and enjoy 0% sales charge*) - you can also easily keep track of your child’s investment account on MyEastspring. MyEastspring is Eastspring Investments Berhad’s online unit trust investment app that lets you stay in control of your investments.

If you aren’t the best at regularly investing, you can also set up a direct debit from your account so that it will auto-deduct your desired investment every month.

If you’re keen on to taking your first steps in investing for your child’s education, visit Eastspring Regular Investment Choice (RICh)’s website for more information.

*The 0% sales charge is subject to terms and conditions.

Imagine sitting at the front row of your child’s graduation ceremony, gleaming with pride at their achievement as they finally make their first step into adulthood. Then, imagine your shock as you realise that their first job’s starting pay isn’t that much different compared to when you first entered the workforce yourself.

According to Bank Negara’s Economic Development in 2018 report, starting salaries for fresh graduates (after adjustment for inflation) dropped for those with tertiary education between 2010 to 2018. A diploma graduate can only expect RM1,376 on average compared to RM1,458 in 2010, while a Master’s degree holder may only earn RM2,707 monthly on average compared to RM2,923 in 2010¹.

While salaries may see a 4.5% rise this year according to Mercer’s Total Remuneration Survey 2020²economic uncertainty following a major global pandemic and a weak economic outlook for our country³shows that we can take nothing for granted in the future.

If your child excels in his or her studies, then there’s a big chance they may be able to secure a scholarship. But it’s most likely that they must apply for the PTPTN (Perbadanan Tabung Pendidikan Tinggi Nasional) study loan for their tertiary education.

It’s no surprise that PTPTN repayment has become a big issue over the past few years, but with fresh graduates’ wages being so stagnant, it’s no surprise that more than half of student borrowers end up defaulting on their loan. In fact, only 49% of those who’ve applied for a loan with PTPTN actively pay off their debt. Of the 51% that default on their study loans, 19% have not made a single repayment⁴. As parents, we must ask ourselves if this is the reality we want our children to be in—to have to deal with debt as soon as they graduate.

While public transportation options are growing in Malaysia especially with new Mass Rapid Transit (MRT) lines and more feeder bus options, owning a car continues to be the more realistic option to get around—especially if there are no public transportation hubs around the area you live. It’s also possible that the nature of your child’s job may call for a car for easier commuting.

A 2018 study by Bank Negara Malaysia showed that among households earning less than RM5,000 a month, 52% of that debt is channelled towards paying loans for a motor vehicle and covering personal financing instead of investment towards long-term wealth⁵. This will in turn, lead to people in this situation getting trapped in this relentless cycle of not being able to accumulate wealth over the long term. It’s food for thought for parents out there as no one wants to see their child straddled with debt and living paycheck-to-paycheck.

Your child will naturally aspire to leave the nest as soon as they become financially independent. Easier said than done as it’s becoming increasingly difficult for people to own their first home.

Housing prices have continuously been on the rise in Malaysia with no signs of stopping. Prices have increased annually by 7.9%, outpacing income’s 5.6% increase between 2010 and 2019. This was worst during the 2010 to 2014 period, when property prices surged more than 10% per year, with the highest being 13.2% in 2012. Between 2012 to 2014, the average annual appreciation for houses was 11.2%⁶.

With no obvious property cooling measures in the horizon, housing unaffordability could rise to extremely severe levels by the time your child enters adulthood. We have first-hand experience of how tough it can be to save up for our first property—wouldn’t we want our children not to go through the same hardship in the future?

More than ever, it’s important to start investing for your child’s future expenses and experiences. Fret not if you don’t have the capital to kickstart your child’s investment fund, as there are compounding interest plans like RICh Kids to get you started on very low upfront capital.

RICh Kids is a regular investment plan specifically tailored for those under 18 years old. You’re required to open an account together with your child because of Securities Commission regulations, so it’s officially considered a joint account.

The key benefit to applying for RICh Kids is that you’ll only need to invest a minimum of RM100 a month! Plus, there’s a 0% sales charge, and you can auto-direct debit with participating banks. You can also keep track of your RICh Kids investment account anytime too.

Remember the old Malay adage, “Sedikit-sedikit lama-lama jadi bukit”? Every little bit goes a long way in securing your child’s future.

Don’t just take our word for it - see how investing RM500 consistently on a monthly basis will look like in five, 10, and 15 years to come:

In addition, the RICh Kids investment plan is the best way to gradually introduce your child into the world of investing. It’s never too early to start so your kids can grow up to become more financially prepared.

Click here and scroll down to fill out the RICh Kids webform. The team’s unit trust consultants will contact you as soon as possible to answer your queries.