Build Your Children's Education Fund with These Savings Options Team Team

Last updated 07 May, 2021

Worried that you won’t be able to afford the cost of education for your child with the current economic situation and the rising cost of living? Whether it’s locally or abroad, plan ahead for your child’s education with these saving options.

A recent survey titled The Value of Education - an independent consumer research study into global education trends, commissioned by HSBC - reveals that Malaysian parents spending an average of US$25,479 (RM107,920) on their child’s education, from primary school up to university undergraduate level.

Another recent survey ranked Malaysia as the fifth most expensive country to get a higher education and claims parents in Malaysia spend more than half their salary to pay for their children’s higher education. The survey looked into the income to cost of education ratio and found that Malaysians apparently spend 55% of their salary to pay for their child to go to university.

But don’t be alarmed, you don’t have to be part of that statistic. Firstly, you will need to have an estimate of the costs for your child’s education which should also take inflation into account during the investment or saving period. With the estimated amount as a guide, you can then set a target amount and decide how best to achieve it. There are various education savings options, but here are the best methods to save for your child’s higher education.

Insurance with education investment

Although most of us usually associate insurance with coverage whether it is for life, medical and more, you can also choose an insurance linked with investment for your child’s education. It’s a great combo because it provides investment and protection for your child. Most insurance companies like Prudential Malaysia, AIA Malaysia, and even banks will offer you these products. There are two types of education insurance:

Endowment policy

  • An endowment policy combines a savings component with protection coverage.
  • Endowment policies can either be participating or non-participating.
  • Non-participating policies do not participate in the life insurance fund’s profits but all insurance benefits are fully guaranteed.
  • Participating policies have a portion of insurance benefits guaranteed, but the total amount of benefits at maturity is not guaranteed because it depends on the insurance company’s life insurance fund’s performance.

Investment-linked policy

  • An investment-linked policy combines the elements of investment and protection based on your requirement as the policy owner.
  • Offers flexibility as you can increase or top-up your monthly premium contribution as your income improves.
  • An investment-linked policy will allow you to choose the type of funds your money will be invested in. However, there are risks involved and there will be no guarantee on the returns, which can be higher or lower than the estimated amount.

Before you choose an education insurance policy, here are some pointers:

  • Consider how much money you want to set aside for your child’s education.
  • Make sure that you can afford to pay the premium because it will be a long-term commitment.
  • Choose a policy that gives you flexibility so you can gradually increase the savings in the future.

Finally, once you have chosen a policy, you need to monitor it to ensure that you are on your way to reaching your goal amount. Actual returns declared by the insurance company may differ from the initial estimate due to changes in financial markets. You can also claim tax relief of up to RM3,000 if you get your child education insurance.


Education savings account

National Education Savings Scheme

Skim Simpanan Pendidikan Negara (SSPN) is an educational savings scheme designed by PTPTN to help Malaysians save for higher education. This scheme is in line with the Shariah concept of Wakalah Bil Istithmar. There are two options which are the SSPN-i and the SSPN-i plus. The main difference between the two account is the takaful coverage included in SSPN-i Plus account. This are 3 types of accounts for SSPN-i account:

Category 1:
Account opened by the parent or legal guardian for beneficiary aged 1 day up to 29 years old.

Category 2:
Malaysian citizen aged 18 and up to 29 years old has an option to open individual account or to be beneficiary for an account opened by their parent or legal guardian.

Category 3 (Individual Account):
Malaysian citizen aged 29 years old and above are required to open an individual account.

Aside from saving for your child’s education, you will also get to enjoy some benefits with this option. First, there’s the tax relief of RM6,000 per year. Free takaful coverage will also be available for depositors who have savings of RM1,000 and above and also competitive dividends for the savings that is exempted from income tax.

Another benefit is the eligibility to apply for PTPTN financing, as without an SSPN-i or SSPN-i Plus account, your child will not be able to apply for PTPTN financing.

On top of all of this, families with a household income that is lower than RM4,000 will be eligible for the matching grant scheme when their child is accepted and enrolled into higher learning institutions. The matching grant of up to RM10,000 will be determined by the savings amount and duration. You can open an SSPN-i or SSPN-i Plus account at PTPTN’s 73 offices and branches nationwide. For a list of PTPTN branches across the country, find out on here. The documents needed to open an account are:

  • Copy of the applicant's MyKad/ Police or Military Card
  • Copy of the child's Birth Certificate/ MyKid/ MyKad
  • Letter of Declaration or Certificate of Adoption (for parents who open an account for adopted child under their legal care).



Amanah Saham Didik (ASD)

If you hold the Bumiputera status, do consider investing in ASD which was launched in 2001. It is suitable to provide future financial needs for education expenses. ASD is managed by ASNB, which is a wholly owned subsidiary company of Permodalan Nasional Berhad (PNB). ASNB was established on 22 May 1979, to manage the 11 funds launched by PNB. The dividend for ASD from 2016 was 6.3%. If you are interested, the price per unit is RM1.00

Eligibility for ASD

  • Malaysian Bumiputera
  • 18 years old and above for Akaun Dewasa
  • 6 months – 18 years old will need a guardian for Akaun Bijak

Unit Trust

Aside from ASD, you can also invest in unit trust funds to grow your child’s education fund. Unit trust is a collective investment where your money will be pooled with other investors and that amount of money is known as fund’s assets. The funds will be invested into a portfolio of diversified assets and then managed by a fund manager. When you invest in unit trust, you buy units and depending on your budget, you can decide how many units you want to start off with initially, then buy more units in the future. For more information on investment, read more here.


Make it a team effort

As all of this effort is for your child’s benefit, get them involved in saving for their education. When you are going through your investments for their education fund, include them and make them aware of the challenges and commitment required to save for their education. You can also let them contribute some of their allowance to their education fund. Aside from that, you can also encourage grandparents or relatives who shower your children with gifts to consider opting for a cash contribution towards their education fund instead.

There are pro’s and con’s to each savings option (do we want to do another article on pros/cons? That way we can allude to say that look out for our next article on the pros/cons), so weigh your options properly along with your risk appetite and affordability. Remember to start saving for your child’s education as early as possible as it is a long-term goal and to take advantage of the power of compound interest.

Related: 7 Tips to Save Money for Your Child’s Education in Malaysia

The team is comprised of many talented individuals, sharing their knowledge, experiences and research to help others make better financial decisions.


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