Preparing For Our Kid’s Education

We all dream of giving our kids the opportunity of a great education, sometimes to the extent of enrolling our child to a prestigious university in the hope that as he graduates and starts his career, his vast network of connection, having been affiliated with that prestigious university, will help jumpstart him into a lucrative career whether it’s employment or business. If we raise an intelligent kid who will grow up to be a consistent with highest honors or valedictorian academic excellence awardee, then we may enjoy a very good discount, even up to 100%, of tuition fee from that university. Some athletic kids may also grow up to become famous varsity players helping out to eliminate the parents’ worry on how to cover their education.

But what if our kids belong to the regulars, the remaining 20% or 30% top students? How are we going to send our children to school?

We go back to how we decide to to invest our hard earned money to prepare our kids to college education. As savings account deposit is out of the question, we are left with bonds or equity or a variable unit linked insurance which gives both an insurance component and an investment fund. Being a business owner will also help.

As I am a Pru Life Financial Advisor, allow me to explain how to prepare a good educational fund for your kid. My example would be for an insured 3 year old child whose parent is the policy owner. The 3 year old kid is planned to enter the University of the Philippines in 14 or 15 years. According to the Tuition Fee Projection, a student planning to entire the University of the Philippines needs to be prepared something like 1,066,034 for a 4-Year Course.

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Preparing this early can definitely help. There is a Pru Life UK product which is designed to help us prepare our kids future education in the university.  As our sample is a 3 year old kid, we may insure him for a limited pay arrangement, 7 years or 10 years so that the money invested will have enough time to grow.

Considering 100% Equity fund as investment fund to choose, this could potentially return an annual average of 10%. This is not guaranteed as the chosen investment fund may perform well or perform poorly in a given year. But if we have high risk appetite, we may want to consider this as Equity fund gives the a very high annual rate of return compared to the other funds. A Suitability Assessment Form needs to be filled out to determine the type of investor we are, whether we have a Conservative, Moderate, or Aggressive investor risk profile.

By limiting the number of years to pay, we pay higher premium so that the annual total amount invested early on giving more room for potential growth.  There is also a unique rider that can be attached to the policy to guarantee that the child’s premium will be paid even if the payor’s life expires hence not able to pay for the premium. This is called the Payor Waiver. The premiums will continue to be paid by Pru Life UK until the child reaches the age where he can already pay on his own should he decide later to continue the policy and make it his retirement plan. Despite the limited number of years to pay, the insured is still covered until age 100.

By age 18 or 19, the projected Fund Value shall have been enough to cover the projected tuition fee targeted for the child’s educational plan if enrolled in the University of the Philippines.

Should anything happen to the insured child, the beneficiaries including the parents will be able to recover the investment thru the Sum Assured amount plus the Fund Value at the time of the insured child’s death.

To the reader,  I can help you with your child’s educational planning. Do you think you need to consider creating an educational fund for your child this early? If your child is still 7 months old, we can already create an education fund for him or her.

If you want to know more about how to go about getting an educational policy, send me a note to pruactiveadvisor@gmail.com