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Contrary to the popular belief that isurance is an added expense, there are several insurance plans that act as a savings plan too. Infact, some of them help grow your money and can be intrumental in contributing towards your savings.
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What is an education savings plans and how to choose one? Education savings plans are one of the best ways to finance your child’s tertiary education. These are endowment plans that allow parents to save money in a consistent and measured manner. Parents can choose a savings plan based on their financial requirements, the returns of the plan and the premium payment tenure they are comfortable with. What do you want to be when you grow up? It’s a question we all ask our kids, and the answers keep changing as the years go by. Before you know it, they go from astronauts and superheroes to lawyers and doctors.And as parents, we need to be in a position to support their aspirations, no matter what they might be. One of the best ways to do this is to invest in an education savings plan.
How do these plans work? An education savings plan is an endowment life insurance policy that is designed to cover one specific goal - your child’s education. It works like this - you pay a fixed premium for a certain amount of time, say 10 years. The plan then grows the money you have invested to provide either, a single payout at a predefined date, or multiple payouts spread across your child’s university years. Also, since an education savings plan is essentially a life insurance policy, it will come with death and critical illness benefits too. Most plans also come with an option to add a rider that will ensure that the plan will continue, even if anything unfortunate happen to the parents. Therefore, with an education savings plan, your child’s future is secured come what may!
How do I choose the right plan? Most parents have little or no experience in choosing an education savings plan. This can cause a little confusion when comparing the market and selecting the right plan. So, if you are unsure which plan to choose, don’t worry! Just follow the tips mentioned below and you should find the perfect plan in no time!
Find out how much you need and choose plans accordingly. The first thing you need to do is find out roughly how much you want the plan to provide as a maturity amount. This will depend on numerous factors, such as the course you want to enrol your child into, whether you want them to study in Singapore or abroad, if you have other forms of savings to complement the payout of the savings plan, etc. Also, remember to account for the rate of inflation. This is because a course that costs ‘x’ in Singapore today could cost up to ‘2x’ in a few years. The rise could be even sharper if you are considering an education abroad.
2. Good returns. Choose a plan that puts your dollars to work in the best possible manner. Also, look at the death benefit of the plans on offer – some will provide as much as 105% of your premium amount as the death benefit. Is this “x” or “20,000” added by accident? I note that this is a blanket statement across insurers. I just want to highlight that our plan doesn’t provide guaranteed interest rates. It does provide gaurenteed return of capital, which means there will not be any losses. Should we ensure that it’s closer to our product or keep it broad? Do advise.
3. Choose a plan that provides payouts as per your needs. Some plans offer a single payout upon maturity of the plans. Others offer staggered payouts at significant milestones of your child’s life and/or university years. You can also opt for plans that start providing payouts every year once your child reaches a certain age.
4. How long do you wish to pay premiums? Different savings plans offer different premium payment patterns. Some have premium durations up to 15 years, allowing you to pay smaller amounts over longer periods. Whereas, some plans offer tenures as short as 5 years, allowing you to invest aggressively. An education savings plan is an ideal way to cover your child’s tertiary studies. If you begin early enough, you can have all the money you need to finance that bright future, with extremely minimal monthly payments. We hope this has been helpful, good luck and all the best!
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