What is an Educational Plan and Why do You Need One?
Parents only want the best for their children, and that includes quality education. After all, education is one of the best ways to equip our children with skills and knowledge to help them achieve a successful future.
Education plans allow parents to set aside money for their children’s future education. It’s a smarter move than delaying your savings, worrying about it when the time comes, and being unable to provide the best for your children because of financial restraints and the high cost of tertiary education.
While many parents opt to pay out of pocket for their children’s education, very few Filipino couples choose to save and invest in education plans. It’s not because education plans are ineffective, but more because many Filipinos do not fully understand the advantages of an education plan for their children.
Here’s what you need to know about education plans and why you need them for your child’s future.
What are education plans?
Think of education plans as a crossover between life insurance and a savings account dedicated to your child’s college education.
When you get an educational plan for your child (ideally right after they’re born), your premiums are placed into a fund where you can watch your money grow over the years.
What is an education plan for?
As your child attends college, you can withdraw from your return on investments (ROI) or account value, which have compounded over the course of your investment period. The accumulated ROI will be more than enough to pay for your child’s college career, whether they opt to study in a private or public institution.
But in case of your untimely demise before your child is old enough to attend college, your child’s education plan can provide a sum that will cover their college tuition.
Importance of having an Education Plan
Education plans are an added cost to a family’s monthly expenses, which may already be difficult for couples with young children. Thus, many parents ask: is it worth investing in educational insurance?
Education has an invaluable influence on a child’s future. So, for parents who value education, the importance of educational insurance cannot be overstated.
Tertiary education can be even more costly. With fewer free tuition fee opportunities, parents face a heavier burden of preparing for their child’s college financially.
An educational plan in the Philippines allows parents to secure their child’s future against numerous uncertainties. Educational insurance ensures that your savings remain safe and continue growing throughout the years. So, when the time comes, you are financially prepared to support your child’s dreams with high-quality education.
With your child’s future on the line, an educational plan is the best investment.
How much is an education plan?
The plan’s benefits and premiums vary on several factors, including:
Your child’s age when you take out an education plan- Premiums are always lower for younger insured individuals, which is why it’s recommended you get one right after your child is born. The earlier you start, the younger your children are, which gives you more time for your money and savings to grow. That’s why taking out education plans for teens will result in higher premiums because there’s shorter time for your investment to grow.
The insurance company- It ultimately depends on which insurance company you decide to go with, which is why it’s important to shop around for the best deals.
The goal amount- Given the rising costs of education, you ideally want the benefit to cover the entire education cost by the time your child enters college. Take into account the school you want your child to attend and the course they’ll be taking up.
Additional riders- Add-ons to your insurance policy will bump up the cost of your premium. On a brighter note, these additional riders will also enhance your policy benefits. For instance, the Bright Rider feature from AXA’s educational plan ensures that in case of your untimely demise, you will still be able to support your child's future education. It comes with a yearly pay out to ensure that your child will go through primary and secondary education without thinking about school funds. By the time they enter college, the ROI of their plan can be used to fund their college tuition fees.
Stability of the company- Pricing is influenced by the company's underwriting and premium calculations. Sometimes, the cost goes up if the rates are not sufficient to adequately cover their claims. That's why it's important to understand the financial strength of an insurance company. If there's a difficult claim situation, you don't want to know that your insurance provider can't pay your claim due to poor financial results.
There are plenty of education plans available in the Philippines, so it’s important to shop around and find a package deal that meets your needs for your child’s future. Even months before your child is born, it’s important to get a head start in shopping around because this is a premium you will have to pay for years. Of course, as parents, you also need to be ready to explore other options, such as potentially using a personal loan as an alternative source of funds to pay for school fees.
Education plans vs. savings account
For parents who want to get a head start but opt not to take out an education plan, the most popular option is to open a savings account dedicated to their child’s college fund and frequently deposit money.
But the problem with this method is that savings accounts’ interest can only go so far and move slowly compared to investing your money in an education plan. Unless you consistently deposit money to your Savings account, you won't be able to beat the annual tuition hike.
With an educational plan, the sooner you get one, the more affordable the premiums and the higher the potential returns will be. Insurance companies like AXA also have a unique bonus-starting Day 1 of your policy, you enjoy a Start-up Bonus equivalent to 70% of the first year premium you invest into your selected AXA funds.
To fully meet your child's needs, you can also add riders to the educational plan. Riders provide insured parties with additional coverage options to ensure your child can still go to college even when you're no longer around.
Over the next 18 years, the cost of college tuition will grow faster than the interest your savings account will gain. This makes it difficult for the average Filipino to save enough to cover their child’s entire college tuition.
One unique differentiator of a VUL product for an Educational Plan that is distinct from mutual funds and UITFs is the protection feature. If the parent dies (the insured individual should be the parent or whoever is the breadwinner), the proceeds of the money can be used to sustain the education of the child. As a parent, you will gain peace of mind that in case the unexpected happens, your children or dependents will be able to finish their studies.
Your Child’s Future Begins Today
For parents who want to prepare for their child’s future, education plans are a good way to ensure your child’s schooling long before their college years. AXA offers educational plans designed to meet your unique situations and goals. With an education plan from AXA, your child will not have to worry about having the financial capacity to get the best education they can reach.
If you wish to check out one of AXA’s educational insurance plans, visit https://www.axa.com.ph/mylifechoice/education. With AXA, you can plan ahead so that no matter what happens to you, your child can receive the gift of education and a secure future.
