Education Planning for Your Child - Why is It Very Important

Children Education is very important part of a personal family financial planning.

In Malaysia, many people especially those from low-middle income group have no plan to save money for their children education.

The main reason is likely because of the government and its agencies have been helping with education scholarship and loans, so they think their children will then get the same help.

Another reason is due to the fact that the low income group is not making enough money for their day-today expenses, hence saving extra money for children eduction seems not the highest priority. Those Malaysian who had hard times to get the education scholarship or loans in the past normally have plan their children education finance up front.

I think majority of the people can still afford to save some money for children education. If yes, or if you still think it is not important, then consider these points:

1. Do you want your children to start their life with a huge financial liability? You should not let your children take education loan and spent their entire life paying back. Imagine if you child take a 100K education loan. By the time she/he graduates, he/she starts the life with a big liability. First, there is a monthly payback of RM100-500 off from their net income - which will reduce their ability to allocate some money for your retirement. (There goes your retirement plan!). Then, they have to payback for years!! 
2. The children will probably blame you for their financial problem then.
   Considering they have to spend lots of money to start their life buying a car, getting married, buying a house, and more... while at the same time have to serve years of education loan that their parents decided for them. 
3. If you still count on your children to fund your expense during retirement - then you make a big mistake.
   That extra money that they could have given to you and your wife will then go into paying back their education loan. Or, like many people do, they withdraw their EPF or other retirement fund to pay for their children education resulting in shortage of their own money into retirement. When you do not have enough money to pay for your medical bills, then you get stressful, your already high blood pressure will then go even higher! Then, lots of other medical problem will 'visit you... :) 
4. Your children starts a life with likelihood of getting broke
   Because of being in difficult financial situation, children will then start using credit cards and fund their expenses using personal loans. We have seen many graduates complaining about having to resort to personal loans, which normally charges very high interests. Furthermore, if the child is the first in the family, he/she normally have to fund his/her brother/sister's education too, or have to renovate the parents house etc. 
5. Your children first 10 years career will be stressful Financial problem causes stress at home and at work. There are two things can happen, 1-your child work very hard to make extra money or extra increment, or 2) your child get demoralized by getting income or increment that is perceived as alway not meeting expectations, resulting in poor performance etc.
6. Your children first 10 years of marriage will be stressful - Stressful work and financial difficulties normally causes stressful marriage. 
7. Generational chain-reaction will occur - If your children graduates, make RM2500 per month but because of poor finance situation, then they will not be able to save money into their children's (your grandchildren) education plan. Then, your grandchildren will take education loan, which by then, has appreciated double the amount, then they will suffer the same way as your children. 

So, what you should do? I strongly recommend you think about and start your children education financial planning. I will write next time on how to do this. But for now, if want to do some calculation of how much is need and how much you should save per month, then you may visit education planning calculator tools provided by ASNB below.

http://www.asnb.com.my/webfinancialcalculator/Education/Education.aspx?culture=Auto

Amanah Saham Bumiputera - ASB Dividend Return

ASB Dividend - Amanah Saham Bumiputra (ASB) is actually one of the best personal investment in Malaysia given its reasonably high dividend return every year while protecting your investment capital. The average ASB dividend from 1990 to 2008 is 8.23%. With average bonus 2.76 cents, investors have enjoyed a good average annual return of almost 11%.  Had you keep RM10,000 in ASB back in 1990, it'd have grown to RM72,633.44 by end 2009. The good thing is, regardless of any recession, your invested money will remain positive.

In my opinion, ASB has been and will be the one of the best investment in Malaysia for many people. It provides good hedge against inflation of your cash, and you do not have to worry about the market performance at all.

(Dividen ASB: ASB sebenarnya adalah di antara pelaburan peribadi yang terbaik di Malaysia berdasarkan pulangan dividen ASB tahunan yang agak tinggi setiap tahun, secara puratanya ialah 8.23% sejak tahun 1990. Di tambah lagi dengan purata bonus sebanyak 2.76 sen setahun, pelabur mendapat pulangan yang cukup baik iaitu 11%. Secara kasarnya, sekiranya anda melabur RM10000 pada tahun 1990, wang anda meningkat kepada RM72,633.44 pada tahun 2009.)

The table & chart below show ASB dividend return and its bonus since 1990.