Question:
What is an education policy? I was told by my agent that I should buy a living policy for my child instead of an education policy as it serves the same function and have life coverage. Your advice?
REPLY:
An education policy is for the parent to save for the expenses of sending a child to university. As this is quite expensive, the parent has to save in advance for many years.
It is better to invest in a low cost investment plan, and get the best return on your savings. A living policy is not appropriate. It has high expenses and gives a poor return.
Read this FAQ.
Your children's tertiary education funding is best done through a vehicle or a financial plan that is purely investment free of those rubbish insurance features.This is to give your saving the maximum exposure to investment , therefore the highest return. Those marketed by insurance companies under different names take a lot out of your money and that is why the return is low. You don't need the insurance coverage .I am sure you already have them. Buy a plan that
ReplyDeletemeets your purpose fully and not to be diluted by other things. An investment plan is for investment and not to be confused with protection.
Insurance agents like to distract you and fool you you with extras which are effectually useless.
Like MR. Tan's usual recommendation. Invest in a well diversified portfolio and earn the highest return.
All of us probably can hang loose because school fees for the kids does not bother us as it is almost free from Primary school to College.
ReplyDeleteLast week when I checked my bank account, and noticed almost $4000 less.
Checked the detail, there is a $3878 deducted for my daughter's SMU fees, well, I was not told in advance by her, she forgotten to tell me. Anyway, I am also expecting it myself.
SMU course fee a year is about $7500, and I suppose with 7% GST, deducted in 2 terms.
Last year was her first year, aside from course fee, purchase of laptop as well. That cost slightly above $10,000 in total then.
So you can imagine the Uni fees will be something most of us did not really bother, partly also because we can use our CPF as well. In the industry, people use to put an inflation of 6% on it, so the longer it is due, the fee will be even higher in latter years. If you want to know how much it is, use a financial calculator and set the interest and term and compute the future value and you will know how much it will be.
Some will calculate and think use cash is better because CPF interest is higher, so hang loose with that and use cash. And some parents will think why let the kid start life with debt to pay after the Uni.
Whichever way, what I am trying to share is beware of such cost as most of our children are marching towards University, before you realise it.
- Thomas Phua
Seems like Investment Linked Policies are not well supported by you guys?
ReplyDeleteI agree these plans seem rather expensive since it has elements of insurance in it.
Regards
Loh Hon Chun
Paymy uni education policy from Income is the worst of the plans available in the market.It is a rojak plan with so many things thrown in.
ReplyDeleteThis can only attract the unwary and "greedy" customers who often have no idea what they are buying,for them the more features the better.
The college plus plan by TM Asia Life is a perfect education plan without all the frills which often take up much cost.It is still an endowment plan but without the insurance. Although not the ideal but it is the best selling plan among the similar plans in this group.
Nothing beats the DIY plan which allows you to save and invest regularly at very low cost. The return from this plan is the best.
No, I am not referring to the ID2
ILP by Income. Although this is not
the most costly but still very costly.Don't go for this plan.
If you are thinking of a plan to fund your children's education seek a qualified financial planner from FA firms for help.They can put together the DIY plan for you.
Remember to mention the DIY plan otherwise they will give you those endowment plans which give them more commission.
* Save in Bank - Around 1-2% p.a (Guaranteed)
ReplyDelete* Save via a WL plan - Around 1.5-2% p.a (Semi-guaranteed)
* Save via an Endowment Plan - Around 4-4.5% p.a (Semi-guaranteed)
Save in a stable well diversified Fund - Around 6-7% p.a (Non guaranteed)
* Save in specially designed portfolio with regular rebalancing - Around 8-9% p.a (Non guaranteed)
Different Plan suits different people. We should not condemn any plans from anyone.
So, Mr.Khiat, did you mean any plan will do if one wants to save for childrens's education fund? Is there a plan which can do all sorts of things for me?
ReplyDelete