Meeting the costs of the best start in life in Hong Kong
Expat parents living in Hong Kong have been set some challenging maths homework. When it comes to budgeting for their offsprings’ education, financial planning involves both division and multiplication. First, divide by two; because education falls into two distinct areas. There’s pre-tertiary – covering all primary and secondary needs – and then tertiary; the fees and living costs associated with university – which may well be in a country other than the one where the family is based. Now, multiply your costs by the number of children; oh, and, depending on their ages, don’t forget to add a projection for inflation.
The days when an expat employer would include school fees in the recruitment package are fast receding, and most expats, wherever they are in the world, are having to foot this bill for themselves. Hong Kong has particular issues around international schools in that the territory lacks the geographical space for expansion or new build, with the result that most international schools are full to capacity and running lengthy waiting lists which in some cases span several years. We even know of one school here that accepts the name of a child put forward by parents following confirmation of the first ultrasound scan of the unborn infant.
The phenomenal demand for international school places from the growing number of expat families arriving in Hong Kong each year has thrown up an intriguing development within the fee planning conundrum. In some schools, placement priority on waiting lists can be secured by buying a debenture but, be warned, the price of these can run into six figures. A popular story currently doing the rounds within parent circles tells of a mother who paid HK$400,000 (£35,000) for a debenture at her preferred choice of school for her child. On moving away she was able to sell that debentured place to another waiting family for a whopping HK$4m (£350,000), which suggests a child’s place at an international school here is a tradable asset and an extraordinarily profitable investment opportunity!
For those majority of parents who don’t have a debenture to sell in order to pay for their kids’ education, the same rule applies as for any long term savings plan, whatever the purpose. The earlier you start saving the better your chances of meeting the bills.
Doing the math with the current figures for university courses suggests early planning is critical. HSBC’s latest survey shows us what international students must pay each year for their course fees and living costs. Of the 13 countries included in the survey, Germany comes in as the least expensive location in which to pursue a higher education. Here, tuition fees start from just US$635 per annum to which living costs of $5,650 must be added. Hong Kong universities are placed as the seventh most costly in the world with annual fees averaging $13,182 and living $9,261. Such averages must be compared with an Ivy League college in North America demanding annual tuition fees of around $25,226 and $10,479 in living costs; while a degree from a UK university requires around $19,291 each year and a further $11,034 to live. Australia will set parents back the most as this has become the costliest of all territories for tertiary level studying – expect fees around $25,375 per annum and living costs of at least $13,000.
All of which clearly illustrates why an education fee savings plan forms an essential part of any expat family’s financial planning. And, in case the perfect degree course for Janey or Johnny just happens to involve three years in Berlin, I’m sure Mum and Dad will find a good use for any residual monies saved up. What about wiping out the mortgage or boosting the pension fund? And for adventurous parents how about treating yourselves to your own gap year?
By Simon Parfitt, CEO of Hong Kong, Guardian Life Management.