For parents, providing the best education for their children is a necessity. In setting up education funds, parents should have a discussion in advance about which school to go to.
For example, whether it is a state school, a national school, or an international school. For higher education, whether to study domestically or abroad.
You and your partner can conduct a survey of schools that are your preference or consult a financial planner who has research on the need for education funds. After that, you can calculate the need for education funding and how to achieve it.
Setting up education funds for children
Should adjust to the level of school needs. In principle, for 1 child, there will be preparation for entering Kindergarten, Elementary School, Junior High School, Senior High School, and tertiary level.
Thus, parents must have a different strategy, namely saving and investing. Apart from that, parents also need to think about the certainty of having education funds for their children by protecting them from the risk of losing their source of income due to the death of the breadwinner.
To achieve these financial goals, of course parents need to consider product choices for children’s education funds. Then, which one do you choose, education savings or education insurance?
Savings is a product to maintain the integrity of the initial capital.
Savings products will provide returns, but because the results can be guaranteed up front, they will usually be equivalent to the benchmark interest rate. Meanwhile, a life insurance policy is a protection product to protect family finances if the head of the family who is the source of income dies or suffers from total permanent disability.
For parents who choose to buy a product with two benefits at once because of practicality, there are two options to consider.
First, education savings.
Education savings is a term savings product that usually lasts 1 year and above, where parents will deposit funds every month until maturity. In addition to getting savings benefits, parents who are considered insured also get life insurance protection benefits.
The use of this life insurance is that savings deposits will continue, even though there is a risk of death for parents. Thus, children will get certainty of savings funds that will be used for their education funds in the future.
Second, conventional education insurance.
An education insurance policy is basically a combination of term life insurance products with added savings benefits. The main feature is a life insurance policy that will pay the sum insured if the insured, usually a parent, dies before the child enters college.
The additional feature is the coffers of the collected savings benefit balance. From this savings balance, the insurance company will issue a certain amount of money when the child enters elementary school, enters junior high school, enters high school, and enters college.
So, if the parents are still alive until the insurance policy expires, the child will only get a portion of the savings in the form of the promised payment plus a bonus if any. Understand that the education insurance described in this article is not unit-linked insurance.
Any financial product
Has pluses and minuses, depending on the needs of the family. Education savings have flexibility in determining the duration because parents are free to save for how many years. Thus, parents can combine education savings with other types of investment as well.
In the case of education insurance, parents are usually more concerned with the duration of long-term contracts until their children enter tertiary education. However, the plus point of education insurance is that it provides certainty that there are funds for education needs up to the age of 17, regardless of whether parents are present or not.
If parents still want to combine their children’s education funds with other investment assets, then education savings can consider as a product that can complement a child’s education fund plan.
However, if parents are more concern with guaranteeing the availability of education funds due to higher risk factors, then education insurance can consider. Whatever the parents’ choice, the most important thing is to prepare education funds from an early age. So, have you prepared a children’s education fund?
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