The cost to raise a child in Singapore is $900,000

Did anyone read the Straits Times article on entitled The $900,000 Singapore child that was published today? All parents and to-be-parents must read this article. The author is Joseph Chong who was the former CEO of a financial advisory firm. It is an amazing article which provided the figures to back up why many couples do not wish to have children.

According to Mr. Chong, a family need to spent $600,000 in real dollars to raise a child assuming 1 child family. It takes $500,000 for each child for a two-child family. Thus, for a two child family, it means $1,000,000 less in retirement money for the parents!

Assuming $500,000 per child for argument sake, there is another additional $400,000 paid by tax payers because of state subsidy. Thus the cost to raise a child in Singapore is a whopping $900,000! This ‘subsidy’ includes the imputed rental of the government schools. Private schools have to pay rental but government schools do not. So the economic cost of this rental cannot be ignored.

One reason why the cost of raising the child is so expensive unlike in the United States is because of the existence of the parallel education system in Singapore – private tuition! In 2007, the private tuition is a $1.2 billion industry representing 17% of the MOE’s own budget!

My comments as follows:

I think there is really something wrong with the education system. Any parents will know that the school’s education system is not working anymore. It appears it is merely for ‘show’ because it is mandatory that children to have at least 10 years of compulsory formal education. Teachers just go through the motion knowing that realistically speaking whatever they teach is not going into the heads of these students because the syllabus isn’t created for kids anyway. That is why there is so much demand for private tutors. For example, I first learn about heuristics when I was taking my CFA charter exam on the topic of detecting suspicious but ‘creative’ accounting. But guess what? P5 students have to learn about heuristics to solve mathematical problems already! I thought it is my kids’ school who was trying to score points with MOE. But later on, I discovered it is a disease spread by MOE itself because it has infected all schools to teach what is intellectually inappropriate to small children. I always see desperate parents (and even tuition teachers!) who post on the facebook wall asking for help in solving the kids’ problems. Their kids come from all sort of school from no brand to branded ones.

There are still many parents who are idealistic and want their kids to enjoy their childhood. So these parents will refuse to send their kids to private tuition. Well, the story is always the same because they will have a very rude shock when it comes to the final year exams. Teachers will call up parents for one-one meetings counseling. In the past, when a teacher calls up a parent, it is because of disciplinary issues. These days, it is to tell the parents that they children’s marks are failing and something must be done. To prove that the kid is doing badly in school, the class and level mean and standard deviation of the marks will be shown and how many standard deviation below the average will also be told to the parents. Parents have no choice but to engage private tutors to move the marks to above the mean or at least X standard deviation above the mean. The problem is that if the bottom starts moving up above the mean, wouldn’t the mean move up too? That is why it is a cyclical problem that having tuition will not help the kid go above the mean. But WITHOUT tuition would mean that kid will move down quickly because everybody else is moving up.

At the end of the day, it all about that t-score. The t-score is actually a t-statistic in which the PSLE marks are converted to a t-statistic but with some scaling and the addition of a positive constant for presentation and avoidance of negative point purposes. This t-statistic determines the fade of the kids forever. But wait, any parents would know that they can actually avoid competing in the national PSLE exam by using the alternatively route called the Direct School Admission (DSA). By using some ‘unique’ capabilities of the kid as a leverage to gain guaranteed admission into Secondary Schools of their choice thus bypassing the need to do well in the PSLE. One very common way of doing it is to ensure that the child goes to the GEP (Gifted Enrichment Program). As a result, many parents will engage GEP private tutors in hope that their kids will go to GEP in P4. But wait, why gifted kids need tuition? Tell that to these parents. In my entire life, I only know of 1 gifted friend and the only time he studied was during lectures and tutorial lessons. Apparently just by listening attentively in class was all it takes for him to score perfectly. Besides the guaranteed assurances of going to a secondary school of choice, the other reason is to bypass taking “O” levels altogether. Huh? Yes, a number of secondary schools offer what is called the six years Integrated Programmes (IP) in which “O” levels is not required in Sec 4. Instead, it is a direct route to taking either the “A” levels or the Diploma in International Baccalaureate (IB). Ok, here is a recap. In order to have the assurance of the P4 kid able to take the “A” level or IB when he or she is 18 years old, he has to have the assurance of going to an IP school. A common way to get this assurance is the DSA (Direct School Admission) because PSLE marks become less important. One way to get into the DSA route is to ensure the P4 is in GEP. To get the clueless-and-still-drinking-milk-kid to enter to the GEP in P4, parents must engage private tutors so that the kid can pass the two-stage P3 GEP screening exams. But to wait until P3 is too late, so parents must make sure the kid have tuition since day 1. What is day 1? I shall stop the iterative process otherwise the system will “hang’.

Traditional financial planning for Education Planning always assumes that the largest cost of education is the tertiary education. These days, that is no longer true. The annual cost of primary education is much more expensive than compared to the annual cost of University. For parents, the lack of funds for the future tertiary education is no longer their concern not because they are rich because they have to figure out how to foot the large tuition bills for TODAY. In other words, Education Planning is no longer to plan for a large cash outlay in the future. Education Planning is about paying for the monthly large cash outlay to the private tuition teacher. I do not see what is the best way to meet today’s large cash outlay given there is no time horizon to save. Perhaps the safest route to having large cash flow to meet this large cash recurrent outflow for tuition is to either become a tuition teacher or do not have kids.

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