Child’s Education - Endowment plan

Endowment plans can be a smart way to save for a child's education. They offer both savings and protection benefits, ensuring financial security even in unforeseen circumstances. However, it's crucial to carefully review the terms, returns, and flexibility of the plan to ensure it aligns with your education savings goals. Here is a site https://wunderkiddy.com/activity/color-in-nature where you can find alot of activities for kids.

HI Anonymous,

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I think your saving per month is a good target, and you have a very long runway of around 20 years.

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As what 1M45 has suggested, put in a S&P500 ETF. The average returns (over a 10 year period) is 10% p.a (usually more, but using a more conservative estimate).

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Simply put into numbers, using a financial TVM calculator, here are some numbers for your consideration:

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1. In about 15 years time, based on 1K investment a month into S&P500, and 9% returns (extremely conservative), you will already exceed your target goal of $300K. By 15 years time, you should have around $312K.
2. Assuming you continue saving the same amount for the remaining years with zero withdrawals, by the end of 30 years, you are looking at: $1.5M dollars.

If you ask me, i think having 5X your planned goal for your child AND yourself is a very good goal.

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I'm also going to be very upfront with you and tell you that no ILP in the world is going to achieve that for you. If you have the discipline to sign an ILP, you will have the discipline to put in $1000 in a brokerage account a month.

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And all of these numbers is without timing the market, rain or shine, just DCA every single month. If i teach you how to time the market, you will even achieve better returns.

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I do charge a nominal fee to teach people investing / financial literacy. Do reach out to Bridge The Gap (https://linktr.ee/bridgethegapsg) for more inquiries. I am NOT a financial advisor and hence I am not motivated to sell you any financial products. I purely feel that local financial literacy is extremely low, and as a result this is being taken advantage of by "financial advisors" who are sales-driven and commission-driven. I purely teach people how to manage their own finances :)

Definitely no ILP. I suggest you should focused on safe investments since you need relatively guaranteed returns to pay for education expenses, which cannot be risky in my opinion

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Try putting the money in T bills, SSB, fixed deposits, money market funds during this period of high interest rate.

Hi anon,

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I'm going to raise a few points here which I think you should give some thought about, along with my own thoughts.

1. Don't do an ILP. Honestly with the boatload of fees that current generation ILPs have (which have come down already, but in my opinion, still high), you will be better off investing directly, even if you require advisory services, at least you are not locked in. Yes, ILPs force you to commit to a premium period and the payment as well, but I feel there are better options. And yes I'm an advisor and I don't advocate ILPs for any of my clients, so that should say a lot.
2. Investing in an ETF comes with its own risk. The S&P500 had a very stagnant period from 2000 to 2010 before embarking on the current run. So there's a risk that from right now till 20 years later, will it grow the way you need it to? It might, and that's a good thing, but what if it doesn't? When this current growth streak ends, is anyone's guess. Could you afford to invest and end up either worse off or just breaking even? Furthermore, another risk to consider is if the market crashes right before you need the money. If this happens, one factor which I did not see mentioned is that your child needs the money NOW. Is he supposed to defer his education just because you need to wait for the market to pick up?
3. Based on your question, you mentioned an 'education ILP' as well as 'guaranteed amount'. No ILP has any guarantee of surrender value. They are all projections. What has a guaranteed surrender value however, is an endowment plan. Yes, there are endowment plans where you can set aside premiums for 10 years and then get a guaranteed payout at year 20. Putting aside $1K a month for 10 years should get you about $200K (projected) at year 20 with any reasonable endowment plan. That's 2/3s of the $300K that you're targetting. What about the last $100K? Well that's done by simply saving another $1K from year 11 to 20 which gives you another $120K. Or, you could invest, knowing that at least 2/3s of that amount is already secured, which will bring you an immense peace of mind as a parent seeking to send your child through higher educaction.

So what's my take on education planning? Simple: This money MUST be there when you need it. There's no point in taking risk if you don't have to. For some people, they might have to invest to get the amounts they need. For some, they might not. In your case, I feel that you don't have to take too much risk. So if I were you, I'd do a hybrid approach, by setting aside some money in an endowment plan to secure maybe 2/3s of the target amount, and investing to achieve the remaining 1/3.

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If the markets do well by the time your son goes to uni, you'll have more than what you need.

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If the markets don't do well, tap on the endowment payout first while giving 3-4 years for the investments to recover. That is your hedge against the uncertainity of investing.

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If you're worried that health related concerns derail your education planning, make sure you have income protection from critical illness as well as a payor waiver on the education plan so that you don't have to worry if your health takes a hit.

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For job related concerns, I'm afraid I'm not anywhere near qualified to advise, although having an emergency fund as a buffer will help you out.

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Lastly, please compare the various endowments on the market because not all plans are created equal. You would be able to get multiple quotes from an IFA who can distribute multiple insurer's products.

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I know this is a long answer but there was no way to make it succinct without getting the key information across. I hope it helps you to think carefully about what to do next.

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Good luck and do reply to this post if you have further questions.