The hike in Malaysia’s household debt stands at RM1.04 trillion currently (2015), or 89% of the country’s Gross Domestic Product (GDP) – this growth of 3% from 86% a year earlier (2014) is extremely worrying. Tensions are higher now, especially when you consider the fact that HSBC Holdings Plc has reported that 57% Malaysian are willing to go into debt to support their children’s tertiary education.
“The financial sacrifices that parents are willing to make to fund their children’s education is proof of the unquestioning support they will give to help them achieve their ambitions. However, parents need to make sure that this financial investment is not made to the detriment of their own future well-being,” HSBC’s global head of wealth management Charlie Nunn says.
“By having a financial plan to meet their family’s overall needs and reviewing it regularly, parents will be better placed to support their children’s studies without compromising on their own long-term financial goals,” he adds.
Parents Must Plan Ahead For Their Children’s Tertiary Education
Raising a family is indeed a challenging journey and there are many unforeseen circumstances that will bring uncountable obstacles along the way. Which is why as a parent, you need to anticipate as many possible outcomes and make plans accordingly to overcome these obstacles.
Talking with CompareHero.my, Financial Planner Association of Malaysia (FPAM) CEO Linnet Lee says parents need to start saving for their children since the first day their kids are born and to also invest the savings based on their risk appetite in fighting inflation.
“Parents should do homework on the cost and type of education they can afford. Learn to invest savings for better growth based on the amount required, parent’s ability to take risk and the duration you have to save up. Nothing is cast in stone, as your child grows you may need to make several adjustments to the plan. Having a plan makes it easier than to start from ground zero especially if your child is nearing tertiary education,” she explains.
Communicate And Observe What Your Child Really Needs
According to Lee, there are at least 60% of these teenagers who have an idea of what they want to do. However, there are many parents who do not buy into this idea and after some disagreements and arguments; the child often resorts out of frustration to the standard answer of, ‘I don’t know’.
So, to find the best solution, she suggests that parents should have conversations with their children about how much they can afford and get them involved in their own education planning.
“You would be surprised how creative and matured they can be. This is where ‘Google-everything’ gives the parent and child access to affordable resources,” she adds.
Parents have to acknowledge that today the world is creating more jobs which did not exist in the past. Hence, they should give their teenager a chance to speak and gently ask them soul-searching questions so that it will help them to figure things out and take responsibility for themselves.
Lee says letting the children study in local education facilities or taking the time to teach the children life skills which are not taught in public schools nowadays is an opportunity for the parent to bond with the child.
Alternative or vocational education may give a child better income advantage than mainstream choices, given if the child is passionate and excels in their chosen craft. Parents should consider the strengths and capabilities of their child instead of force them to take up courses in the hopes that it would let them have higher-earning careers in the future.
“I know a parent who insisted that their son study law and the poor boy had no interest at all. This boy had to go through his examinations several times before passing and today, he has gone into performing arts and creative work after handing over his law degree to his parents.”
Is An Oversea Education Really Necessary?
Sadly, many Malaysians are still skeptical about the quality of local universities and colleges due to uncertain government policies and a perceived lack of great talents to guide the students; hence they would rather turn to private colleges and even overseas facilities.
Lee believes that parents should for opt for local universities as an overseas education is beyond reach for most families and local university is certainly more affordable.
“I acknowledge that quality is a concern. I too have a child and I grappled with this situation at that time. It was then I decided to structure how to supplement any shortfall there may be in terms of competency. One of which was to encourage her to go for internships or even part-time work to learn a skill and yet be paid for it,” she opines.
There are many teenagers who tend to persuade their parents to allow them to go overseas and study though it may not be the best option for them in terms of value and education. As a result, some parents take up exorbitant loans to support their child’s impulsive decision and yet both parties still think they are doing the right thing.
Parents taking on the extra burden of a loan may face unnecessary stress on their financial and physical health. Does sacrificing their retirement fund even guarantee the child is able to care for them in the future? The job market is increasingly competitive and an overseas education is not a surefire way to guarantee your child’s success.
“Call me a contrarian, but giving your child the best education you can afford is already fulfilling your duty as a parent. Is there anything wrong for your child to learn how to work and fund their further education?” Lee asks.
She notes that the younger generation has a longer duration to accumulate wealth compared to their parents. And for parents, making your child earn their keep and fund their own education does not mean you love your children any less. In fact, your children will appreciate their qualifications more as they worked for it in every sense.
Children Need To Be Responsible For Their Own Future
Without the need to worry about funds to support their own tuition fees, many young adults tend to enjoy a free and easy lifestyle with ‘pocket money’ contributed from their parents or student loans. However, it is high time to put a stop to that and these young adults need to think about what value they have to offer to their family and society alike.
Parents may step up to be their guarantors for applying personal loan to support their own education and repay those loans on their own.
Despite the many young fresh graduates with degrees from reputable colleges or universities, there are still many HR horror stories about how inept or unprepared some these graduates are. For every keen and motivated fresh graduate out there, it seems there are some who would turn down an invitation to a job interview because the office is too far from their homes!
Many recruiters blame coddling by parents who would rather see their children sitting at home unemployed instead of encouraging them to diligently work their way up through the ranks. But at the same time, these fresh graduates need to realise that their parents will not always be there and reality will bring them crashing down to earth if they do not take charge of their future right now.