The 101 on Education Endowment Plans for Your Child

Anyone with a child in Singapore would know that raising kids is an expensive affair. One of the costliest parts of raising a child is their education. What you need to do is start saving – through investments and insurance – for your child’s future requirements. There are many child-centric plans in Singapore that help parents save for their kid’s education and other future needs.

Related: What is the Price of Pregnancy in Singapore?

How does a Child Plan work?

A Child Plan is an Endowment Insurance Plan that you, as a parent, can buy on behalf of your kid. The premium you pay for a child plan gets accumulated and grows as per the returns rate of the policy. If you start early enough, you can save enough by the time your kid is out of school, so that the returns from the endowment plan can fund his or her tertiary education. These plans are good for risk-averse parents who want their savings to appreciate at a rate faster than bank savings.

Related: Best High Interest Savings Accounts in Singapore

Benefits of a Child Plan

If you’re not sure why you should look for an endowment plan for your child, read on:

• Guaranteed cash benefits: While some policies give you a lump sum at the end of the policy period, some plans release amounts in parts, at various stages of the child’s education, from primary school to university. The rate of returns varies from policy to policy, but you can expect around 3.5% to 5% p.a. You also get bonus payouts when your policy matures.
• Life insurance cover: The life insurance cover can be considered the main feature of a life insurance policy since it is what determines the size of the payout. Life insurance cover will ensure that your family’s financial future remains intact should something happen to you, the policyholder.
• Limited premium payment: You need to pay premiums only for 5 to 10 years and not throughout the policy period.
• Other cash benefits: Many policies also offer hospital cash benefits and fixed payouts.

Is it an insurance plan or an investment plan?

In a way, it is both, though they are primarily insurance policies. These plans provide both life insurance cover as well as decent returns. In endowment plans, unlike whole life plans, you only have to pay premiums for a part of the policy period and not throughout. Also, endowment plans allow you to get returns before the end of the policy maturity, or receive it in stages.

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How to choose the right child plan

Here are some tips to help you make the right choice with a child plan in Singapore:

• Consider the purpose: When it comes to insurance for securing a child’s future, you have a lot of options. You can take something like a term insurance plan for the sake of pure protection or an endowment plan to earn a return on the money. These days you can even take an insurance plan that is made to help pay for your child’s education at university.
• Consider the returns: The most important reason for investing in a child plan is to maximise your savings. So of course your primary consideration should be the rate of returns. Policies these days give around 3.5% growth on an average, so if you can find a plan that offers you more, go for it!
• Consider the premium requirement: You need to pay premiums for varying number of years for different policies. You might have to pay premiums for 5 years, 10 years or 15 years. It’s possible that the shorter the premium payment duration, the higher the premium amount. So check whether the premium is affordable and whether you would be able to consistently pay it for the number of years specified.
• Consider the payout frequency: Many of the child plans release specified amounts at regular intervals – instead of a single payout at maturity, that is. This gives you the option of spreading out the income, and use the money to fund your child’s educational milestones. If you don’t want to use the money, you could always re-deposit the amount with the insurer or in a fixed deposit account or any other investment tool. If you think you don’t need such liquidity, you could choose a plan with a lump sum end-of-term payout.

Related: Do You Need Health Insurance, Even with MediShield Life?

Some Child Plans in Singapore

Here is a list of some of the prominent child endowment plans in Singapore that you could consider:

• Aviva MyEduPlan
• Prudential PRUfirst Education
• NTUC Income VivoChild
• Manulife Educate
• Tokio Marine KidStart

Your child’s education is a very important goal to save for. Finding the right plan is the first step towards achieving this goal.

Tell us which plan you’ve chosen and how it has or will help you, in the comments below!

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