The money-planner’s view
LINNET LEE, chief executive officer of the Financial Planning Association of Malaysia, shares her thoughts. Question: In your opinion, why are parents spending a fortune on their children’s education?
Answer: Modern parents are more discerning and they show love differently from the traditional tough love approach.
Those who have had to go through hard times do not want their children to suffer, so they provide as much as they can, sometimes making sacrifices, such as putting retirement plans on hold, refinancing their homes and taking extra jobs.
The move to private schools is evident in the last few years, and the cost of such education is a premium — RM7,000 per year versus RM100 for public schools. But the facilities and teaching methods are different. Q: With a competitive job market, parents are sending their children for extra-curricular activities, such as ballet, piano and swimming lessons. Do you believe this is necessary and does it impact the outcome at the end of their education?
A: Extra-curricular activities are good for children’s development. As a parent myself, if I can afford to give my child all these, why
not?
However, there are some key factors that must be considered so that parents can ensure that the money is used wisely and yield the results they want.
The activities must match the ability, interest and passion of the children, not the parents. The quantum of activities must also match affordability.
Avoid trying to keep up with your friends, neighbours and relatives’ children — there are different strokes for different folks.
Parents must know that some of these activities may not yield benefits in their children’s adult life.
If it is bearing down on your finances, be prepared to cut your losses and stop it, especially if the parents and children are suffering.
Ask yourself if those activities can be picked up by the child in their working years, when they can pay for it. If so, do you need to start them now? Q: Many parents are making sacrifices, including cutting back on holidays and other luxuries. How far should they go? A: Cutting back on holidays or luxuries is okay, but working oneself to the bone or causing one’s health to suffer is a no-no.
Who is going to look after the children if parents are too sick or
not around to see them to adulthood and independence?
Stop, think, plan and take action. Q: From your experience, how much should one allocate for their children’s education?
A: I would like to throw that question back to parents: what can you afford?
Have you done your financial planning to see that your plans are well-balanced in terms of your family protection and other important life goals, such as retirement and paying off debts?
Allow yourself a little break. All work and no play makes Jack and Jill dull parents.
If you are facing a challenge in planning your finances, seek the help of a certified and licensed financial planner, who is licensed by the Securities Commission for financial planning.
Yes, you have to pay planning fees. But the cost may work out cheaper than making a lifetime of financial mistakes.
I also urge parents to consider vocational skills if the child has an affinity for it. I know a boy who will spend hours with a mechanic as he is fascinated by cars.
Do you know that vocational education can also open doors to working overseas? More so if the child can speak decent English and other languages. Florists, tailors, plumbers, electricians, mechanics, mani- and pedicurists are in demand in some countries, and they earn just as much as a pharmacist, accountant or doctor.
Last but not least, the most valuable lesson you can teach your children is the value of money — wise spending, smart investments and delayed gratification. It will hold them well in their lives, regardless of social status.