Falling ringgit squeezes families with children studying abroad

A trip to the money changer for those going overseas continues to make a bigger hole in the pocket if you only have the Malaysian ringgit. This is even more significant for those wiring funds to their children studying overseas, especially in the United States and United Kingdom. – The Malaysian Insider file pic, July 24, 2015.

With the ringgit at its lowest in 16 years, families with children studying overseas are faced with the bleak outlook of paying more for education than they had imagined.

Those feeling the pinch hardest have children studying in the United States and the United Kingdom, and face an increase of thousands of ringgit because of the currency's depreciating value against the US dollar and pound sterling.

Although some families say the situation is still bearable despite having to make certain adjustments, they worry that a continuing slide of the ringgit will bring greater problems.

One such parent is Ramesh, a member of the senior management team in a logistics company, who has already told his two children studying in the US to cut their expenses.

"I have definitely asked them to cut down on their expenditures. I have asked them to be more prudent on amenities and also, I told them that if they want to come back for a holiday, they would have to save up and pay for tickets themselves," he told The Malaysian Insider.

Ramesh has a daughter and son who are taking a preliminary course to become a chiropractor and geologist, respectively, in Minneapolis.

Both are studying in the same college and are staying in one house.

"I used to pay about US$35,000 per year for both of them. That comes up to about RM120,000 for tuition fees and living expenses when the ringgit was in a better position.

"But now with the ringgit down, I expect to pay about RM140,000, which is RM20,000 more.

"And if you divide this amount on a monthly basis, it is a lot of extra money that we need to fork out now," he added.

Ramesh had also saved a significant amount of money in Singapore where he had worked for a number of years before moving back to Malaysia.

"So a lot of the money for their tuition, I pay from my Singapore account. And fortunately, the Singapore Dollar hasn't depreciated against the USD. So in that sense, it hasn't really created that much of an increase.

"But, there are also many other expenses that I have had to pay from this side, such as living expenses and medical insurance. That comes to quite a bit," he added.

He said his daughter was recently offered a position as an assistant tutor in the college, which Ramesh said would help in staving off expenses.

"I have also told them that they needed to work extra hard to try to earn a scholarship as I have another two children who will be joining them in the US this year," he added.

Mike Ngui, whose son is studying mechanical engineering in Mechanicsburg, Pennsylvania, said he and his wife might just have to put off attending their son's graduation ceremony next year.

But adds that he is fortunate enough as his son is on a college scholarship, which covers half of total costs comprising tuition and board, as he lives on campus.

"My son also works on campus during the semester, which helps with small ancillary expenses," Ngui added.

The former finance consultant, however, said that based on the current rate of RM3.81 per USD, he would need to come up with an extra RM8,000 for the next semester for his son's tuition fees.

"Each semester is around US$18,000 to US$20,000. The balance payable after financial aid has been around US$8,000 to US$9,000. This used to translate into the vicinity of just under RM30,000.

"The next semester's invoice is coming in a couple of days. Based on a rate of RM3.81 to US$1, I would have to pay something like RM36,000 to 38,000," he said.

Meanwhile, Ramesh said that he had chosen to send his children to the US to study as he wanted them to live away from their comforts of home so that they could learn independence.

However, with some years to go before all his children graduate, Ramesh is worried that a weakening ringgit might force youths studying abroad to abandon their studies and return home.

"I remember that there were many Iranians studying here. But when their currency (rial) dropped so badly once (in 2012), many had to pack up and leave. This was because they simply could not sustain the expenses here because of their weak currency. I know many of them had to abandon their studies and go back.

"I just hope that this does not happen to Malaysians studying abroad," he added.

The ringgit was last at RM3.8 to the US dollar from 1998 to 2005, during which it was pegged to the greenback following the Asian financial crisis which was blamed on currency speculators. It had been hovering above RM4 to the US dollar for many months prior to the peg and capital controls being imposed in late 1998.

The ringgit is Asia’s worst-performing this year and has not been helped by ongoing allegations against Prime Minister Datuk Seri Najib Razak and his brainchild, state investment firm 1Malaysia Development Berhad (1MDB), resulting in political uncertainty.

- TMI