The following is a story about a desperate mother trying to fund her son’s education in the UK.

Due to financial problems, she was unable to pay about RM75,000 in overdue college fees. She had a week to come up with the funds or her son would have to leave college.

She reached out to charities, churches, Her Royal Highness Sultanah Johor’s foundation and even political parties.

Suggestions were made to realise the cash value of existing insurance policies, take personal loans and so on. In the end she failed to come up with the cash.

This is a cautionary tale for parents who want to provide their child with the best education they can afford. This is particularly so if the child wants to study abroad, say at a prominent university in Singapore, Australia, the UK or the US.

If you are really serious about your child’s education, you should start making provisions for it from the day your child is born, even if you aren’t wealthy.

This will give you about 18 years to put together enough money to provide for a solid education. The golden rule is: “Start early – don’t wait until your child is sitting for the SPM examination.”

Starting an education fund

There are many methods to do this, including:

• Investing in property: Property appreciates in value over time. When the cash is needed the property can be refinanced or sold. In the meantime, tenants can pay a big chunk of the mortgage.
• Investing in stocks: Look for shares in companies with a good financial track record. Such companies include Public Bank Bhd or Berkshire Hathaway Inc. But, get them at the right price for maximum gains.
• Investing in SSPN: The PTPTN savings plan provides tax relief of up to RM6,000 a year and the occasional “bonus” from the government.
• Buying an education insurance policy: This is only suitable for parents of young children as it takes time to really compound the cash bonuses. If the child is a teenager, this option can be skipped, but parents who go for it may qualify for tax relief of up to RM3,000 a year.

Remember, you have 18 years to save

Here’s a question: What if someone is unable to set aside enough money for their child’s education?

Would they empty their bank account, Employees Provident Fund or sell the house to see the children through university?

Many parents have and are now broke. Most cannot afford to retire. Is it recommended?

The question to ask is will that person be physically fit and healthy enough to continue working past retirement. In general, the young have much more energy.

Just be honest with your children about the family’s financial situation. Most would understand as they will be aware of what is going in in the family. It is better to let them know early so they are mentally and emotionally prepared.

A personal story, and one that is common. The writer scored 10As in the SPM about 25 years ago, placing him in the top eight of his home state of Kedah that year.

He did not receive a scholarship nor could his parents afford to send him to college. They told him this in advance when they saw how well he was doing in school.

Though he dreamed of studying music at Berklee College of Music in the US, he took up aeronautical engineering at UTM so he could skip two years of Form 6.

He became a full-time musician before graduating as an aeronautical engineer.

He hopes his story will inspire people to pursue their dreams and goals with tenacity, whether rich or poor, young or old, educated or not.

It is not necessary for parents to get themselves into a financial hole to fund their children’s education.

The children will eventually be successful, regardless of whether they received the best education the world can offer or otherwise.

That said, parents who wish to give their child the very best have no excuse but to start preparing early for it, even 18 years before the funds are required.

This article first appeared in kclau.com

KC Lau is a personal finance author and trainer.