Why you should pay for your own retirement instead of your child’s tuition

Ideally, I’d love a situation where you can do both — cover your own retirement comfortably AND fund all of your children’s education.

Unfortunately, we live in a world where sometimes, there simply isn’t enough money to go around.

Retiring in Singapore?

I met a man in Singapore who told me that he had a million-dollar home in Singapore he was renting to others, while renting another smaller flat in Singapore instead.

He said the rent covered the mortgage of the home plus a little extra per month, so it was perfect.

I told him it was a fantastic idea, especially since he got into real estate just before the big boom in prices, and he would have something totally paid off and ready to resell if he wanted to use the money to retire.

(Never mind that I wouldn’t do that in my own situation, but I can see the potential for $$$ in his decision.)

He smiled back at me and said it was actually because he wanted to be able to sell the home to pay for his kid’s education.

I asked if he had a retirement plan, and he said he had money that had to be saved aside in a mandatory retirement plan with Singapore, but other than that, it’s all he had. No extra company pension and no other investments.

I didn’t say anything more, because it’d be rude, but it sure made me think about retirement versus education.

Surely, he will not use the entire million on his kid’s education, but it will be at least in the $300,000 – $400,000 range (maybe more, by the time 20 years comes around) because he wants to send his kid overseas to North America to study, as well as to pay for his housing and food.

It’s apparently a big thing to send your kids abroad to study in Singapore, but it means that tuition is doubled for these kids. $20,000 tuition turns into $40,000 automatically, not to mention the exchange rate and possibly higher cost of living.

While I absolutely appreciate that parents want to do everything above and beyond for their children, they have to understand these things:

1. Your home may not be worth a million by the time it comes for the kid to go to university (in 20 years)

People always think buying a home and property means that you are set for life; that prices will always rise.

But no one thinks of inflation, the fact that there might be a housing bubble that bursts and that things happen beyond your control.

Putting almost everything you own into a single home, thinking it is your golden ticket is risky business.

2. No guarantee that your mandatory pension plan will be enough to cover the cost of living in 20 years or more when you retire

I don’t know the exact numbers, but I am hearing from other people that they can’t afford to retire in Singapore, even saving into this mandatory retirement fund.

Then you tack on top of it, the cost of living that might skyrocket in the future? Singapore is an island that imports absolutely everything. They make and produce nothing that can help them become independent in terms of food sourcing. Everything comes from other countries, which is why things are so darn expensive.

So imagine in 20 years when other countries get greedy and want to charge you $5 for a bunch of green onions when they make it for pennies? What then?

Your million dollars turns out to not go very far in such an economy.

3. Your kid is not a guaranteed thing

I’m sure his kid will get into A college in North America, because colleges love to take your money, especially those coming overseas, but what if he doesn’t make it in?

After he makes it in, then it’s another risk that he won’t be able to take care of you and your wife, as well as his own family!!

IF you are relying on your kid to help take care of you that is. There are some stories going around about children kicking their parents out of their home, forcing them to live on the streets and so on.

I am not saying anyone’s child will ever act like that, but you have no guarantee that they won’t, even if your best of intentions, love and efforts.

Who knows what might happen?

Think about it before you decide

Ultimately it’s your money and your call.

For me, I can tell you that I will be sure to fund my retirement first (nothing luxurious or extravagant) before funding education (equally) for any of my kids.

I want to be sure that:

• I will NOT be a burden to them when I retire
• I can take care of myself
• They understand that they have to make it alone in the world, because hopefully, I won’t be around to take care of them*

*It’s a sad thing if a parent has to watch their child die. That’s all I’m saying.