by I. Christianto, Jakarta
Nowadays, sending a child to a good school has become the most difficult and toughest challenge for many parents, since education is getting more expensive. One of the solutions to this problem is saving — the sooner parents start saving, the better. Among the ways to afford tuition and help pay for other educational expenses is investing in a good education fund, such as an insurance or investment plan.
Education for one’s children is a long-term investment but tuition costs are increasing every year, creating problems for many people. If your children are still young, costs will increase substantially from the present level by the time they are ready for basic or higher education.
Conventionally, parents put money into regular saving accounts and use the funds accordingly when needed. But there are now better options for an education fund that suit the financial needs of the families.
Realizing the myriad and changing needs of the public for an education finance scheme, banks and insurance companies have designed various innovative programs. Most of the programs offer flexibility and give customers full control over all decisions. Customers can choose where and how much they want to save, how much coverage they need for the education of their children.
The programs principally aim to help pay the tuition for future education or even if the student is starting very soon or is already studying. Nowadays, many parents start planning for their children’s education very early to ensure that they can benefit from a higher education at the school of their choice.
Savings, insurance or investments especially designed for education have become popular choices for many parents to prepare solid, secure plans that can help them pay all or a substantial part of the costs. For example, a 28-year-old father of two who plans to retire at the age of 55 has a productivity period of 27 years, which is a relatively long time to prepare education funds for his children. The prospects are even better if his wife also has a regular income.
Insurance can be an option to plan future education funds, assuming that the parents are not overly confused by the tuition when their children are ready to enter every level of education such as elementary, junior and senior high school and university.
Many people choose to buy insurance for financial security in case the unexpected happens. This is for protection, not to double their money. Several education insurance plans ensure that in the unfortunate event of the death of a parent, the child’s education continues unhampered. In this scheme, a policyholder agrees to pay a premium to an insurance company over a certain period. Education funds are partly released at each level of education that the children pursues or as scheduled.
Meanwhile, an education savings plan is basically no different to saving for any other long-term goal. This scheme requires careful planning and discipline. Parents can start saving a certain amount of money that suits their needs. Some people have such saving plans for short-term goals. It’s better to invest in a fixed deposit as the money cannot be withdrawn until a set time.
Parents can also consider an investment plan if they are ready for the risks. An investment plan usually provides quicker growth and flexibility. The most common investment plan related to education is usually a product that combines insurance.
Many people, especially those who can afford it, choose the three options as an education fund as the schemes complement each other. Actually, most products integrate two or three aspects. To attract more customers, an education savings or investment plan is combined with insurance options.
People must be careful to check whether a combination of savings and insurance plan offer different interest rates compared to a pure, regular savings plan; or an investment product incorporating an insurance plan provides dissimilar benefits as there are paid premiums. Be also careful to find out if, with the insurance scheme, there is higher risk of loss or less yields.
Most products on the market are apparently combinations of the three aspects. The education savings plan with Bank Danamon (Tabungan Pendidikan Danamon), BII (Tabungan Pendidikan BII), Bank Niaga (Niaga Pendidikan) and BNI (BNI Tapenas) are offered in combination with insurance schemes. Bank Mandiri also has the Tabungan Rencana Mandiri, a savings plan that combines insurance through PT Asuransi Jiwa Manulife Indonesia.
Education insurance products have also become popular due to the variety. For instance, PT Prudential Life Assurance has PRUsave and PRUsave for juveniles, PT Sun Life Financial Indonesia has The Graduate and a unit-linked product called Brilliance, a life insurance product that is combined with investment options.
Education is indeed the key to a world of personal and professional choices in this and next centuries, while tuition costs go up every year. The best way to save for a child’s future is to start as early as possible, planning their education funds.
Tips on saving for education
* Start saving money as soon as you are able.
* Choose an education fund realistically, determining what suits the family’s financial condition and needs. The key word is discipline in saving the money.
* Involve the children in the savings plan; teach them about saving.
* If possible, it’s better to make one separate plan for each child for each educational level.
* Check the track record of the bank, insurance or financial company.
* Seek assistance from an agent to determine the amount and period of scheme.
* Consider the years each child will spend at every level of education including preschool, kindergarten, elementary, junior and senior high school, university and higher.
* Pick a school, private or state. Keep in mind whether the school is a favorite, top and well-known. This closely relates to cost.
* Select the location of the school. Locally or overseas, in Asia, Australia or the U.S.
* Check the current tuition of each level and chosen school.
* Calculate the education costs when each child enters the school at each level by estimating the inflation rate for the enrollment year.