The biggest challenge for the NRI families is to provide quality education to their children and making proper planning to meet the expenses. Funding fees of international school is one of the biggest financial commitments which can give sleepless nights to the parents. However, judicious planning and proper preparation are the keys to meet the inevitable costs.
Plan early
You should start planning as early as possible and the better way is to plan right from birth.
Generally, parents looking to fund school fees either want to invest a lump sum or set up a regular savings scheme, thereby spreading the cost.
It has been estimated by Tanglin Trust that the lump sum required upfront to fund one child from kindergarten through to age 18 at an international school in Singapore is SG$725,000.
Most of us do not have this figure at hand and the best you can do is to set aside a regular amount each month. Using the process of ‘compounding’ means that any income or capital gains generated by your original savings becomes available to generate income or capital gains itself. This principle can have a significant impact in the regular amount required to achieve a fixed sum. For example, using a net investment growth rate of 7% per annum, if you wanted to save SG$1 million by 2026 you would need to put aside just over SG$5,745 each month. If you waited for five years, you would need SG$13,890 each month to save the same amount.
So the earlier you can start saving, the better. The amount you get back will depend on how your investment grows and on the tax treatment of the investment selected.
Mutual benefits
If your parents are residents in the UK, trust planning can also be a useful tool if they wish to chip in for your children’s school fees and achieve Inheritance Tax (IHT) mitigation at the same time. If they make regular payments from their income without blowing all the inheritance on a fun filled retirement, then these “gifts” are not counted as part of their estate for IHT purposes.
The demand for places at international schools is gaining momentum as NRIs desire that their children get the best education. They also want their children to get settle into Singapore with the same language, types of sports, extracurricular activities and style of teaching.
Thus, competition between schools for the best teachers and leaders is high and this has resultant impact on school fees. Premium international schools charge high fees because they have to offer better salaries and benefits packages to recruit and retain the best teachers.
As the cost of school fees looks set to rise it is sensible to ensure that your income and investments are working as hard as possible for you. Getting into the local system isn’t easy for many NRI families, so budgeting for an international school is part of life in Singapore.