“Discipline” for proper handling of funds for your child’s University expenses

The EDGE publication for this week edition wrote an article about how you can ensure your child’s proper handling of the funds you have saved up for his/her University expenses.

This can be a long and daunting process if you are a new parent as you probably need to be doing this over the course of the full 21 years. Multiply these numbers by the number of children you have and you know that “discipline” plays an important part.

There are 2 parts of the “discipline” that can take precedence. One is the discipline from the parents and another is the discipline from the child. If either one of the two lacks the discipline, then the consequences could be severe.

1.) Discipline – from parents

For parents of a new born baby, this means that you probably need to start saving right from the start when your baby is born until the day he/she turns 21. The good thing is time is on your side and you can save minimally each month such that your daily activities would not be impacted. Additional income such as the baby shower angbao and New Year angbao from relatives and friends can also be channeled into this account. Alternatively, you can set up an endowment plan for your child by putting in small amount of money each month to ensure that sufficient amount of the child’s University expenses are met when he or she turns 21.

My case: I am still figuring out whether I should be saving them on my own by opening a separate account for my son or use an endowment plan that could give me higher returns than fixed deposits in banks. The advantage of the latter is probably the higher interest rate that could combat the rising inflation but given other commitments I have (such as my monthly life insurance for 15 years), I wouldn’t want to commit to another fixed plans over the long run. Saving up on my own would ensure more flexibility but again this amount would lose to inflation over time.

2.) Discipline – from child

On the other hand, proper discipline needs to also be accounted from your child when he or she turns 21. Imagine the amount of money that you have saved up all these while for his or her education expenses goes into unnecessary expenses like buying luxury goods on car and clothing if your child lacks the discipline. The end result could be much worse than we thought. By opening up an account and saving these monthly funds under your child’s name, the funds could be withdrawn for potentially unnecessary expenses.

My case: While I have not gone through this stage yet, I am planning to instill tight financial discipline right from the start by teaching him the proper ways to handle money. To do this, I can monitor over time on how he spends his weekly allowances for example and whether he has saved up any excess allowance he doesn’t need to spend on. Peer pressure and temptation could play a big part in our society here, so it is important that the family leads by example right from the start.

What about you? Any better ways you think parents could use to educate their kids?