Securing your child’s education

Education doesn’t come cheap. Ask any parent today and he or she can tell you how expensive a private education can be for one’s child.

These days, preschools alone charge anywhere from P30,000 to more than P100,000 per school year. Tuition fees for grade schools and high schools range in that amount too. But college — now that can be even more expensive if a four-year course in a premium private university is targeted. A semester alone will cost P60,000 to more than P100,000. And if a college course abroad is desired, that will cost at least USD 5,000 per semester, not counting living expenses. What now if your child wants to study MBA? What more if you have more than one child?

Industry estimates show the total cost of education in a private local university today amounts to P1.1 million to P2.3 million. In 16 years, the same university will be charging P2.2 million to P4.6 million for a four-year course. This is because tuition fees increase every year.

The question now is: How prepared are parents to provide for their children’s education? Filipinos are known to value education, believing it is a ticket to the good life. Indeed, observations show that the best jobs go to those who receive the best education in the country. And so a lot of Filipino parents put savings for their children’s education a priority in their lives.

How to save up

But just how should one save for a child’s education? Joe and Gina have a two-year-old child. They started saving for their child’s education since he was born, depositing P2,000 monthly in a savings account they opened for this purpose.

According to Teng Alday, Insurance Director for Citicorp Financial Services and Insurance Brokerage Philippines, Inc. (CFSI), Citi’s insurance and investments arm in the country, while Joe and Gina’s efforts are laudable, they could be in for a disappointment.

“Unfortunately, their savings account balance may not be enough for their child’s college tuition in 16 years. Inflation alone will already eat up a portion of their savings, since the inflation rate these days is higher than the prevailing market interest rate given by banks, which may be a paltry 0.75% per annum.”

What is thus needed is a well thought-out financial plan. There are several ways to save for your child’s college education and one option is to buy an insurance plan especially packaged to address this need. An insurance educational plan not only ensures that the fund will be available when the child needs it, but also guarantees that this will happen even if the parent or the person paying for the insurance plan may no longer be around.

It starts with an assessment

A well thought-out financial plan starts with an assessment of one’s financial status, goals, and time frame. Parents will do well to consult a financial planner who can help them with this assessment.

“When it comes to securing their children’s education, parents traditionally look to insurance as a choice. At CFSI, we assist our customers to determine what their goal amount should be to send their child/children to college, how much money they will need to set aside regularly to meet this goal amount and what are the product options available to them to meet this need ,” related Alday.

CFSI makes it easier for clients of its affiliate companies including Citibank, Citifinancial and Citibank Savings to learn about an array of insurance products, backed by several leading insurance companies, and aid them by sharing information about how they can make their choice.

The right product

For parents who are at their earning peak, they can choose a plan where they need to set a specific amount of money for a limited period. “Most executives favor this arrangement so that they can fully pay for their insurance in five or 10 years, and then concentrate on other financial goals, like preparing for their retirement,” said Alday.

Most parents look for the following in their insurance plans, when aimed for educational expenses:

• A plan that pays out a cash benefit for four years when the beneficiary turns 16 years old;

• A plan that will give a lump sum graduation gift for the child; and

• A product that provides for a contingent fund that can defray the child’s elementary and high school education expenses in case something happens to the policy owner.

With the many options today, it is difficult to zero in on the best ones. This is where CFSI comes in.

“Our clients appreciate the convenience that we offer – we can take them through not just the insurance options available, but also the different products in each of these options. When they do make their selection, they feel that they have arrived at the best possible option,” added Alday.

Start today

The early bird catches the worm, as they say. This is true in the field of financial planning, too. The earlier one starts setting aside money for a child’s education, the more funds will be accumulated in the future. This is due to compound interest, and longer time period to accumulate the money, which will work together to help parents meet their financial goals. Starting an insurance plan for your child’s education today is thus a wise thing to do.

For more information on how to address your child’s college education needs, call CFSI Customer Service at 423-6338 or 423-6399 and set up an appointment with a CFSI Insurance Specialist.