Saving for School - Insurance

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In Singapore, tuition fees at the two universities are currently about $5,500 per year (except for dentistry and medicine courses that are more expensive). When it is your child's turn to enter university, this sum could have ballooned, with inflation and rises in fees. And if you send your child overseas, the bill, including school fees, living costs, air fares and other expenses, could amount to more than $60,000 a year.

Some parents regularly put aside a sum for their children's education, either into a savings account or a unit trust. Others expect to rely on their CPF savings which can be withdrawn under the Education Scheme. However, note that CPF funds can only be used for local studies and have to be repaid with interest within 10 years.

A number of banks offer savings accounts for children. However, only POSBank's First Account offers an education grant along with the savings account. If the parent holding the account in trust for the child dies or is disabled, the bank pays an education grant to the child - $100 monthly from age seven to 12 years and $200 monthly from 13 to 18. There are conditions though. For example, the child has to be below five years old to open this account, and under six years old when an accident happens to the parent.

What's An Education Policy?
It appears that these days, "insuring" the children's education is an option for many parents. Despite the generally cautious attitude about spending, education saving plans are highly valued and will be maintained as far as possible.

Almost all the major insurance firms here offer some form of education policy. Some, like NTUC Income and Prudential, offer specific policies for children's education, while others like John Hancock, GE Life and AIA tailor endowment policies to fit their client's needs.

An education policy is essentially an endowment policy, where the owner pays premiums for the term of the policy, which may be from 10 to 24 years, and receives a lump sum at maturity. Some of the policies pay out a sum of money once every few years, normally three years.

This payment comes in handy if you require some funds during the term of the policy, eg, if you want to send your child for those extra courses (piano, computer, etc). In fact, some companies, like John Hancock, have tie-ups with child education and enrichment service providers.

The main benefit of such an endowment policy is the coverage and payer security that it provides. If the parent dies, is permanently disabled or is struck with a major illness, all future premiums of the policy will be waived, and the child gets the amount insured at the end of the policy.