Last week, a friend and I went over to another friend’s place to hear him pitch a children’s education stroke insurance fund for Tee. He has been a friend since University days and I’ve known his family even before, so trusting this guy implicitly was as easy as eating cake.
He explained thoroughly what the fund was and it sounded quite good. It is from ING – basically, it is a forced monthly savings for us that will be invested on a global scale so Tee gets her returns with interest when she comes of age. The returns were calculated at about 7%. So if you put in half a million from now (3 years old) till she is 18 (15 years of forced savings), she would get back about 1.3 million.
Then, if her carer were to kick the bucket, we no longer have to pay the monthly installments anymore but Tee would still get her full returns.
Tee is also covered on top of this education fund, a full term life insurance within it. I asked the guy what a term life insurance was? For so long, I’ve never really understood what it was, despite having one myself. So he finally explained that a term life insurance is……*drumbeats* a big payout from an insurance company to you or your beneficiaries, should you die or become permanently disabled before the age of 65, OR are unlucky enough to contract the standard 36 illnesses stated in your insurance document. I finally get it now.
Coming back to the ING scheme, you can withdraw at anytime if you’re in trouble. You can apply for an overdraft loan once the policy hits maturity of RM135,000 for up to 3 years. The child gets a small reward should she score any A’s for her SRP and SPM.
Have any of you invested your child’s future in any of these education funds? Another friend of mine just said that it is better to have your children’s policy separate i.e. to get a term life insurance for your child and then a separate education fund policy for the child. She hasn’t told me why yet. It’s probably a matter of distributing your risk.
I used to think insurance was all a con, like how you pay to determine the sex of your child and if it doesn’t work out, you get your money back? but after Tee was admitted unsuspectingly to hospital when we didn’t have any insurance, we’d immediately gone out to get her some medical insurance because you never know when you could con them back.
One night at the hospital costed us RM1500. Had we bought some medical insurance earlier, costing RM300 per annum, we could have bought an entire hospital.
Please share your insurance stories. Privately or publicly. We want to get her something but don’t know what yet.
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insurance.. I suppose, something like an endowment plan whereby a certain amount gets deducted from your savings account into the insurance plan, is good for people who lack the discipline to put aside a certain amount of money to invest. The thing is, the service charge and other charges are very high.. something like 40% ( in the first year) and 25% or thereabout (in the 2nd to xth year) deducted off your capital, according to an insurance agent from AIA. Aside from that, she is also a Public Mutual agent like me. So the amount that is invested into the education fund is much lower, than say if you had invested in unit trust funds whereby service charge of about 6.5% is deducted one-off at the point of investment and thereafter management fee of 1-1.5% deducted annually.
Last time, back when I was clueless about finance and stuff, my late hubs who was a remisier and an accountant by training, was the one in charge of all these, planning for children’s education and such. He bought medical insurance for the kids but as for their education fund, he invested in unit trust and the stock market.
I did not understand why back then but now that I am more educated in investment and finance related stuff, I realised that investing, be it in properties, or stock market, or unit trust, is by far, a better way to preserve your capital and the yield from these investment instruments can be higher than the 7% you mentioned..
7% is very conservative. For investments like yours where you lock in the money for 15 years of so, you can afford to go for something with higher risk. You don’t have to worry about short term volatility and fluctuations of the stock market because this money is meant for the longer term. Young people have this advantage of time you see. Therefore their investment profile should also be of a higher risk nature, say, as compared to a pensioner.
By the way, these are just my personal opinions as well as knowledge I have gained from the financial services industry. Something for you to consider 🙂
I too have learnt quite a fair bit here. Thanks for the invaluable advice Jomel 🙂