Thursday, December 4, 2008

Education Planning for Your Children

Education Costs Are Increasing Every Year!!!
How much is it going to cost you to send your child to college or university when he or she is ready for higher education?

The following is a chart that compares the current cost of education and the years ahead based on the estimated fees for the popular courses in local universities:

You'll Save A Lot More By Starting Early
Look at the following comparison of how much you’ll need to save in order to achieve RM100,000 for your child’s education fund at the age of 18 at 3% interest rate per annum:
Age start savings /Duration to maturity(18 yo) /Monthly savings*/ % of difference
in savings

1 (NOW) /17 /RM376 /0%
5 /13 /RM525 /39.6%
10 / 8 /RM923 /145.5%
*Savings is at the end of each month.

What can I do to insure my child's future?
Bringing another life into this world is an extraordinary thing and an event eagerly anticipated by most parents-to-be. But although having a child and watching its growing years can be a joy in itself, potential parents need a reliable financial plan before embarking on creating their own miracle - because bringing forth a new life is also a heavy responsibility.

As parents, it is only rational you would want to provide the best for your children and ensure a sound future for them and the best way to ensure a sound future is to provide a solid education - teaching them how to fish instead of fishing for them.

However, the cost of higher education is constantly on the rise, sometimes rising significantly either due to inflation or some other economic factor, especially at private colleges or universities. The high costs can result in a tremendous financial drain for a family with college-age children. However, as it is a predictable cost, it can be prepared for in advance.

As a parent, you would have to take into account a variety of factors. Where would you like your child to go to school? How much is the tuition there now? How much would it be when your child reaches college age? What about the costs of room and board there? What other college expenses will your child have, such as books and supplies?

Finally, the fundamental question: How much have you saved?

Where do I start and what should I look out for?
To ensure the child's education options are not limited due to rising costs, experts advise parents to begin their education investment fund as soon as possible. Parents can opt for using their life insurance or Family takaful as a vehicle for funding at least a part of the child's education needs, as the cash value build-up in a cash value policy could be tapped at a time of need. The policy could also ensure that the education fund is topped up in case something happens to the breadwinner of the family.

However, there is an easier way to go about planning your children's education future. Takaful Nasional (ETIQA TAKAFUL) sells specific educational policies, which are Syariah Approved, namely ETIQA TAKAFUL Sarjana, aiming to provide an amount of money at the time the child reaches college age. Policies such as these not only minimise or remove the hassle of planning and saving for your baby's education future; it also comes with other benefits.

The primary one, of course, is that policies such as these ensure that a certain amount is set aside each month for the child's future instead of being used with the excuse of "I'll make up for it next month." By buying education plan, a parent is also eligible for tax relief of up to RM3,000 a year. ETIQA TAKAFUL Sarjana enables a waiver in premium payments should something happen to the parent paying for the policy. This way, no matter what happens to you, your child's education fund is taken care of.

However, before you sign on the dotted line at the end of the day, ensure that you have not overstretched yourself financially. There is no sense starting out with good intentions but stalling halfway because you cannot afford the premiums. Take into account your income, expenses, assets and expectations for your child. Find out the potential education costs you would be faced with when he or she reaches college age. Remember to factor inflation into the equation. All this may sound like serious number crunching but if you find a policy you like, chances are it would come with a friendly financial planner who would be able to advise you on your costs.

Set your premium based on your current financial situation and the amount of time you have to invest. The key is to set a monthly investment target that is reasonable. You can increase the monthly premium each year if your income increases.

After that, just sit back, relax, enjoy your child's growing years and let the ETIQA TAKAFUL grows the education fund for you.

For more info, kindly contact:
Syed Mohd Farid

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