Friday, December 17, 2010

Financial planning for a child

Many parents think that they should buy life insurance as a financial plan for a child. This is a bad idea. It is an idea that is planted to them by an insurance agent who wants to earn commission to sell any insurance policy. So, buying insurance for a child, e.g. to fund for university education, is one of these ideas.

It is better for the parent to invest the savings in one pool, to be used for a variety of purposes (one of which is education expenses). It is important that the savings should be invested in a flexible form and should produce a fairly attractive yield. Most life insurance policies in the market fail on both scores - i.e. they are inflexible and provide a poor yield.

Read this FAQ about financial planning for a child.

Read this FAQ about personal risk management for young people.It is more important that they have adequate savings for emergencies and their retirement. If they have more than enough savings, they can use some of this pool of savings for the tertiary education of a child, but it should not be at the expense of the other needs.

Tan Kin Lian
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1 comment:

zhummmeng said...

Children ONLY need H&S medical insurance....and NEED NO other insurance..but if their parents who have ALREADY MET their OWN NEEDS and have extra cash they can splurge on their children's needs which are of less priority and risks of lesser probability of happening..This is based on first thing first commonsense, head sense and NOT emotion.
Insurance agents will stoop to exploit emotion and one of the reasons why Singaporeans are under insured.

December 17, 2010 9:56 AM

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