Saving for your child's future
It's never too early to start saving for your child's education. That's particularly true in Hong Kong, where parents can pay between $50,000 and $120,000 a year to educate a child at an international school.
With some careful planning, however, school fees can be less of a burden.
Ewan Stirling, head of customer service propositions, personal financial services at HSBC, offered some advice to parents planning an education fund. First, parents should properly estimate the cost of the desired type of schooling, including costs for trips and extra curricular activities, to determine the amount they needed to save and the length of time required to do so.
Inflation has to be factored in, as school fees can rise faster than inflation. When the saving begins, parents should segregate education funds into a separate account so that it could be managed independently.
Instead of opening a passbook savings account for their children, parents should consider alternatives that can provide a single integrated account to hold a balanced portfolio of deposits and investments.
HSBC's children's integrated bank account can be used for this purpose. It can also be used for children to manage the money they need once at school, with parents able to authorise them to have free access to the ATM network and to internet banking.
Other banks offer similar children's accounts. Generally, there is little to set them apart, but it is worth keeping an eye open for special promotions.
Parents can choose to build an education fund through regular savings, lump sum investment or a combination of the two.
Different ways to invest for schooling costs include:
Cash deposits, cash funds and investments that offer guaranteed returns at no risk, or if the funds were needed in fewer than five years.
Bonds and bond funds that provide low-risk ways to save or invest a lump sum from a five to 10-year period.
Insurance-based savings schemes (over a minimum 10-year period) that offer guaranteed returns to be paid when private schooling starts.
Equities and equity funds as a higher-risk alternative to insurance-based savings schemes over the same minimum period. For example, parents could start an education fund for their one-year-old child over a 10-year period.
Depending on their attitude toward risk and taking into account inflation growth of 2 per cent per annum, parents could pay from $5,000 to $3,200 per month to accumulate a fund of more than $550,000
Parents may also want to consider establishing an education trust for their children to ensure they can complete their education in the event of their parents' deaths. With this trust setup, parents can also arrange for funds to pay out at regular intervals in order to cover education costs at different stages.
International schools offer little respite in the form of scholarships or fee remission schemes. Only a handful offer scholarships.
Last year Korean International School launched a $10 million scholarship programme for high-flying students. Five full-tuition scholarships, each worth $80,000, are available in each year from Grade 7 to 12.
Since 2003, Canadian International School has offered a Sun Life Financial Excel Scholarship - worth up to a maximum of $100,000 annually - to a permanent resident completing Secondary Five at a local secondary school.
Independent Schools Foundation Academy has a scholarship and financial aid programme. Outstanding students can be awarded a 40 per cent fee reduction while qualification for financial aid is assessed by family income. Australian International School has a limited number of scholarships for students entering Years Nine, 10 and 11.
Direct Subsidy Scheme schools are required to offer fee remission for students from low-income families.
The English Schools Foundation also offers a fee remission scheme, but only for parents with children in ESF schools who have hit hard times.