Best Ways to Prepare Children Education Fund insurance

Effect of Inflation

The cost of education continues to rise every year. The increase could reach 10% to 20% / year. Price increases over time (or a decrease in the value of money over time) is called inflation. And inflation in the education sector including the highest.

If we had a newborn child, about six years he will enter elementary school. If the money base elementary school entrance good quality this year is 5 million, then the next six years the cost could reach 8 million (assuming inflation of 10%) or 10 millions (inflation 15%). Therefore, we do not collect the money up to $ 5 million, but collect money worth 10 million, specifically to enter elementary school.

Of course we also need to prepare funding junior high, high school and college, which is certainly greater than the money base elementary school. If tuition junior high good quality this year the amount of 7 million, then the next 12 years, the money base will reach 19 million (assuming inflation of 10%) or 32 million (assuming inflation of 15%).

If we are not ready with the costs they will be, the alternative is to educate our children in the public schools. Free. But some of us may lack confidence in the quality of public schools. If there is a good quality public school (SBI or RSBI), it would definitely not free anymore.

In addition, although elementary, junior high, and high school has been a free country, universities are not free. Unless we are smart enough so that the child managed to get a scholarship, the rest we still have to collect the money.

So, how to work around this?

There are several ways to raise money, such savings under the mattress, savings in banks, or deposits. But the ways they will not be responsive to inflation. Piggy bank at home there is no interest, while the deposit rate is currently an average of only 6% / year. In deposits, although the money we grow 6% annually, in fact the money they will be reduced in value. If we save 500 thousand per month and after 5 years of accumulated 30 million, in fact 30 million in the next five years was not the same as 30 million now. With inflation of 10%, then 30 million five years later only with money worth 19 million today. In other words, if 30 million at this time we can buy 30 sets of dining table for @ 1 million, five years later earned only 19 sets the dinner table.

How evil of inflation; secretly he robbed the majority of our money while we were asleep (unconscious).

Two Ways to Prepare Education Fund

Therefore, the best way to prepare children's education fund is to save or invest in an instrument that can generate returns equal to or greater than inflation. What is, or what are they?

First, save the gold or silver (dinar or dirham). Gold and silver prices always go up, and the increase could be offset even beat inflation. If this year entered elementary school tuition is equivalent to 10 grams of gold (5 millions; per gram to 500 thousands), then six years later was it stays in the range of 10 grams of gold. If tuition entered junior high school this year 14 grams of gold equivalent (7 million), then 12 years into the future at all costs remain about 14 grams of gold.

Savings in gold / silver guarantee the value of our money in the future, without being affected by rising prices (inflation). So if we already have 10-20 grams of gold at this time, no need to worry if only for matters entering elementary / junior high school. But it remains to be raising money for other purposes.

Saving gold can be repaid, but because the price of one gram of gold alone now has more than 500 thousand, and the gold is usually sold in units heavier (2, 3, or 5 grams; and 1 dinar only weighs 4.25 grams), then for the only person able to save 500 thousand a month, he had to wait several months to buy gold. Or it could be him repay the gold in pawnshops, but subject to administrative costs and profit margins, and there is a DP (advance) the amount of about 25%.

A more affordable option is to save the silver (dirham). The price is currently around 70 thousand per dirhams, 5 dirhams buy free cost of manufacture. Dirham can be purchased offline and online outlets that sell the dinar and dirham. The address please look on the internet.

Second, invest in stocks or mutual funds. Stock investment means we are directly buy shares of companies listed on the stock market (Indonesia Stock Exchange), whereas mutual funds are investing in shares / bonds in the capital market through an investment manager.

Investment in stocks / mutual funds can generate greater returns than gold, but it contains the risk of losing money. The risk of loss can be minimized with adequate knowledge. Therefore, before deciding to plunge into the capital market, we must first learn the ins and outs of investing in stocks / mutual funds. At a glance this sounds difficult, but if you have the time and ready to learn, why not.

Whether investment stocks / mutual funds need big capital? In the past may be yes, but not now. Now we can open an account at a securities company (brokerage / stock broker) with a deposit of at least 5 million, and some have only 100 thousand. 100 thousand? Yes, and I've opened an account at a broker TSB. But of course they will be 100 thousand new to open accounts only, can not be used to buy any shares. To start buying stocks, we need to deposit 500 thousand or 1 million; it's enough to buy a lot shares that cost 1-2 thousand rupiah per share. So we can add to our stock holdings each month or whenever you have more money.

If the stock seems to be quite complicated and need to learn a lot, then mutual funds do not need that much learning. I entrust our funds to an investment manager who is an expert in investing. Besides mutual funds can be repaid at a cheaper cost. First offered mutual funds with an initial deposit of at least tens of millions, but now there are mutual funds that receive payments from 100 thousand / month.

Is there another way to collect money for the future? While it used to be, because both (saving gold / silver and investment stocks / mutual funds) can be repaid on a regular basis with the remainder of the salary or monthly income. And this paper was my goal for people who rely on the life of a regular salary.

Previous Must Have Insurance

Maybe you think, OK we can put aside money on a regular basis to buy gold or mutual funds, but how about in the middle of the street there is something undesirable to us so that we can no longer repay the funds they will be?

The solution: before saving or investing, we must first have life insurance.

In the priority financial planning, life insurance takes precedence over the investment, because the investment can be a total failure if in the middle of the road something happens to us, whether illness, accident, or died. If it hurts, then we must seek treatment. Need money for treatment. The more severe the disease, the greater the money we need. The question is whether we are willing, if the results of our investments, which was originally for educational purposes, used for medical expenses? Of course it's better if the cost of treatment was from the other party, in this case the insurance company. Thus, our investment funds remain safe.

Or if we die, it's obvious our children not only lost funds for education, but also the source of their life. Therefore, life insurance is obligatory for parents who already have dependents living. Not just have, the amount must be sufficient.

One thing to note: That should take life insurance is the parent, not the child. Children do not need life insurance, because if he died, both parents will indeed be sad, but not troubled in terms of economy.

Insurance Educational Endowment (Traditional)

From this idea, that the preparation of future funds must be coupled with life insurance, financial products emerged called education insurance. Insurance education provides a certain amount of cash when children enter school levels-levels, plus insurance, plus exemption / premium payments if the parent dies. This type of insurance are usually offered insurance companies are endowment (endowment insurance, traditional insurance classified), because he is providing life insurance money at the same time the cash collateral.

But if this kind of education insurance is adequate to provide coverage to the cost of going to school in the future?

Let us look more closely. First we must know how much it costs to enter elementary school, junior high school, and PT today, and then calculate the cost in the future to include the inflation factor. Following education insurance without first calculating the needs of our children in the future will result in two things. First, overpriced, but this is still mending, passable because more rather than less. Secondly, the funds that we receive the education stages can not help when the time is needed, because the amount is too small.

Just this, let us consider the entrance fee is currently 5 million elementary school, junior 7 million, SMA 8 million, and PT 10 million. Assuming inflation of about 10% per year, then 6 years later, the entrance fee is 9 million elementary school, 12 years later junior high entrance fee of 20 million, 15 years later entry fee SMA 31 million, and 18 years later the entry fee of PT 50 million. Total funds needed 110 million.

Some education insurance product that I've seen give the fund 10% UP stages when entering elementary school, 20% UP when entering junior high, 20-25% UP when entering high school, and 45-50% at admission UP PT. There are also providing funding UP 10% in the fifth year (kindergarten), but the percentage of the time of entry PT to be reduced. In general, the scheme of distribution of such funds, the customer will return on investment (through 100%) at the time of his entry PT. After that, the insurance will provide scholarships per year for our children study at PT for 4 years. The percentage is calculated from the last balance in entry PT. Total funds received by the child steps customers reach more than 100% UP.

From the overview page, then we need insurance education with UP 100 million up 110 million. To make it easier to count, we take 100 million. UP 100 million is the basis for the calculation of funding stages, as well as a lump sum cash given to heirs if the policyholder (parents) died.

With UP 100 million, the funds received phases are:

- SD (10%) of 10 million. God willing enough.

- SMP (20%) of 20 million. God willing enough.

- SMA (25%) of 25 million. Less about 6 million.

- PT (45%) of 45 million. Less about 5 million.

- Scholarships per year for tuition (4-5 years), the percentage is calculated from the year-end savings account balances that exist at the time. This is where new customers benefit from the funds he has paid. The amount is approximately 10-20% of UP.

To get the UP 100 million, if the premium payment period of 18 years (newborn), parental age of about 30 years, then that should be paid is 100 million divided by 18 years, ie 5.6 million per year, or 470 thousand per month (rounded) , If your child has a 3 year old, then the payment period of 15 years, and the monthly premium to 560 thousand. (More expensive. Therefore, the best time to prepare the education fund is as early as possible).

It is a general overview of education insurance is usually offered insurance companies. No insurance education that uses a slightly different scheme, with a total funding stage reached 250% or more, but premiums are more expensive.

Education Savings

In addition to education insurance, there is also the so-called education savings. The difference, education insurance company issued insurance, education savings incurred by the bank. Compared education insurance, education savings provide greater cash value because there is interest. Large flowers slightly below the deposit rate and the higher than usual accounts; currently around 4-5%.

Education savings there is also a life insurance premium and free facilities. Only a very small life insurance, ie (of a product that I've seen) between 5 sd 20 times the monthly payment, depending on when the death. So if 500 thousand monthly payments, life insurance premiums between 2.5 million to 10 million.

Now, there are education savings also offers life insurance is greater, up to 480 x 320 x monthly deposit, and some are accompanied by health rider. However, the additional benefits that will reduce the portion of the savings between 10% to 30%.

Here, education savings becomes no different from traditional education insurance, which are both classified as endowment insurance (endowment; insurance + savings). But education savings provide other advantages, which funds more easily removed (because of its savings), a large uptake up to us, and when withdrawals could be anytime (amount and timing of withdrawals is not listed in the agreement).

Educational Endowment Insurance Overview

Now let's review the educational endowment insurance TSB with a few questions.

First, whether the funds given stage is quite helpful when later needed? If the inflation assumption of 10% met or less, then the funds are sufficient. Less-less bit bisalah us more of their own money.

In fact, the cost of education may rise higher than the assumptions page. So if you want a more secure, we need to use the assumption of 15% or even 20%, and if so, then the premium we pay could reach 2 to 4-fold.

Moreover, even if inflation is educational only 10% or less, the premium paid amounted to 470 thousand per month is actually too expensive. If the money that we put on deposit with the interest rate of 6% per year, the total of which we can no longer 100 million but 160 million. Only there was no insurance.

Secondly, if the policyholder dies, whether funds remains acceptable stage? Yes. There's even a lump sum of 100 million.

But talk about life insurance, UP 100 million was actually very small. If the policyholder or parent dies, the money 100 million if consumed for daily needs may be discharged within one-two years.

Can anyone Cheaper?

We continue our review.

Third, is there a cheaper way? There, using cutting-edge insurance product called unit-linked. Unit-linked insurance is a plus investment. Model investments in unit-linked together with mutual funds, namely investment manager allocates stock to the customer, a mix of stocks and bonds, or a mixture of bonds and deposits (depending on the type reksadananya).

Here the link unit different from the endowment which is a combination of insurance and savings. What is the difference between an investment with the savings? Investment contains expectations for greater profits in the future, while saving only produces a number of collected plus interest. Because the result is a greater potential for that, then investments contain the risk of loss, while saving more secure. Another difference is that investment returns can outperform inflation, the savings could certainly be eroded by inflation.

The cash value of the endowment insurance is a savings account because of the amount guaranteed. While the cash value of the unit link is the result of the investment, the amount is not guaranteed but could be larger.

Choose: guaranteed but the amount is small, or not guaranteed but the number could be larger?

In addition to providing opportunities of investment returns greater than inflation, also provides a link unit UP soul is much greater.

Just to illustrate, of the engine program that I have a link unit, a premium of 470 thousand / month for 18 years, for a parent to the age of 30 years, will provide the benefits:

1. "Funds stage" by an amount slightly larger than that given educational endowment insurance, which is 10 million (incoming SD), 20 million (SMP), 31 million (SMA), 50 million (PT). A total of 110 million.

2. Bonus 10 million per year for 5 years in PT, is given if the assumption of a minimum investment of 10% per year are met.

To this end, a total "funds stages" reached 160 million, more than the total paid-up funds amounting to 101 million. Term funding stages I put between quotation marks ("), due to unit-linked funds can basically be taken how and anytime, as long as there are still remaining to pay for the cost of insurance. Just as education savings, while the withdrawal of funds and the amount of funds not listed in the policy.

3. UP inhabitants of 300 million, is given when a parent dies. This benefit applies for life, not just during the period of premium payment.

4. Results of investment continues to grow and expand, which can be used for various purposes, including pension funds and additional legacy. This benefit requires the fulfillment of the investment assuming a minimum of 13% per year.

Schemes and the benefits they will be gained by the insurance portion of the distribution of 230 thousand and the portion of an investment of 240 thousand. In addition, a number of riders (additional insurance) can be added, such as the benefits of hospitalization and surgery in hospitals, protection of critical illness, protection of accidents, protection from total disability, and benefits payor (exemption premiums plus premium payments if the policyholder experience pain critical / total disability). If the additional benefits they will be taken, then the composition of insurance and investment could be changed, and it changed the funds stages or UP soul can be given.

Although the results of the unit-linked investment is not guaranteed, it does not mean to lose. There are several ways to protect investment returns in order to generate optimal returns, one with diversified funds or funds spread on some instruments. Unit-linked funds invested in various investment instruments, no pure stocks (mutual funds), there is a mix of stocks and bonds (mixed funds / balanced), and there are in bonds and deposits (fixed income funds). Specifically for educational purposes, the composition of which is ideal to generate optimal returns (quite high but it is also quite safe) is 20% of stock mutual funds, mixed funds 30%, and 50% fixed income funds. With this composition, then achieving returns of 13% per year is quite realistic.

To benefit which is roughly the same as that given endowment insurance, which funds life stages plus UP 100 million, I could wear a unit link premiums between 300 thousand sd 350 thousand / month.

Knot

The best way to prepare children's education fund is to save or invest in instruments that provide returns greater than inflation (rising prices). At the same time, parents also have to take out a life insurance, so that if something unexpected happens to him, the child's education plan is maintained. Life insurance can be unified with the investment, can also be separated. Each have a plus-minus.

Examples of savings that are resistant inflation is gold and silver. Other types of savings (savings, bank accounts, deposits) are best avoided for the long term.

Examples of investments include stocks and mutual funds. Both of these instruments offer higher returns than gold and silver, but it contains the risk of loss. The risk of loss can be minimized with adequate knowledge about the world of investing.

Educational endowment insurance type of guarantee some funds stages of education and life insurance money if died during the agreement. But because the cash value in the form of savings, it can be eroded by inflation. To work around this, installment savings we need is greater than it should be. Additionally UP soul is small, only the total amount of money that we paid plans, and is valid only for the duration of the agreement.

Education savings almost similar to insurance education. The cash value is greater because there is interest, but the smaller life insurance. Besides education savings is more flexible in terms of timing the withdrawal of funds and the amount of funds that can be taken.

Unit-linked insurance offering investment returns greater than the endowment, UP soul bigger and valid for life, and can be added rider (other insurance benefits) were varied. Unit-linked funds are not guaranteed, but the security of the investment fund and the results can be optimized by setting the proper instrument composition. []

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