Parents advised to start saving early to fund children's education

Funding your child's education means starting to invest early, as inflation will erode the value of savings if the funds are left idle, financial advisers say.

For a rough gauge of future earnings, Sonia Cheng Mee-lin, a senior business manager at Prudential Assurance, says parents can look to salary levels in the first five years of their employment, which generally reflects the trend in the next 30 years.

"It's rare that this income will jump significantly unless there are some breakthroughs," Cheng says. "The annual salary increment rises may not even keep pace with inflation, so you need some investment or saving plans for the future, and you need to take advantage of the power of compound interest."

But first set a goal. Whether you plan to send your child to a local or international school or a boarding school abroad determines your investment strategy, Cheng says. For example, a parent might pay HK$5,000 into an education fund each month from the time the child is born. Once the accrued total reaches a certain figure, the parent may be able to stop paying and let the sum grow until the child goes to university.

But the growth of the chosen financial vehicles often depends on economic ebbs and flows, so parents should be cautious and avoid putting all their eggs in one basket.

A senior investment consultant at Charles Schwab, Choi Man-yiu, says his clients generally have three main objectives for investing: retirement, housing and their children's education.