Life Insurance Basics – investment-linked life insurance may help build your child’s education fund

Sending your children to school is almost never easy or cheap. Total tuition and school fees could reach hundreds of thousands to a million pesos a year. And for college, if you choose to send your child to a private university, the tuition fees can easily skyrocket. If your current monthly income cannot support that sort of expense, it's time to think strategically. The sooner you plan ahead, the easier it will be to set up an educational fund for your kids. Let's picture this scenario. You have a 6-year-old that you have big plans for, so you want to send her to a prestigious private university. But at this point in your life, you have not begun building your college fund yet. So that means that you have more or less 13 years to save up before your child steps into college. How much would you need to save up for at this point? Let's presume that the current tuition fee for one school year in your chosen university is 225,000 pesos. Let's also assume that the university increases their tuition by as much as 10% each year. So in 13 years, one year's worth of tuition would be at 776,761.02 pesos. By the last year of your child's college education, it can possibly be at 1,033,868.92 for the senior year. Add up those 4 years worth of tuition and you'll total at 3.6 million pesos. And that's just tuition. You'll also have to consider other related costs such as food allowance, books, and more. Not to mention the effect of inflation. So going back to present day, this means you have to prepare at least 3.6 million pesos within the 13 years that you have before college to ensure that your child's education will not be disrupted due to financial problems. It looks overwhelming. And a single source of income would definitely not be enough to accumulate that fund. But it's not impossible. You can do it by exercising discipline, giving your utmost commitment, and using time wisely to piece together your income, your savings, plus potential earnings from investments to help you build up an educational fund. One financial vehicle you can use to add to an educational fund is investment-linked life insurance. In general, investment-linked life insurance provides two benefits. 1. Protection of income in case of death of insured. Death benefit. 2. Potential earnings from invested premiums in a fund. Investment-linked life insurance can provide you additional means to raise a fund value that you may add to a college education fund. A portion of the premiums you pay for an investment-linked life insurance are set-aside funds invested in stocks, bonds, and or other types of financial assets managed by expert fund managers. The funds can help you grow an additional source to supplement your child's educational fund. Depending on your risk appetite, you personally decide which fund you'd like to invest in, and take control of it as you reach your financial goals for your child's education. Because of this flexibility, investment-linked life insurance offers potential faster growth of your money to supplement your education fund. Take note though, investment-linked life insurance is not the same as an educational plan. Rather, it is a way to gain income protection for the family in case of the death of the insured, and also has the added benefit of potential investment earnings that can be used to add to an educational fund. The investment feature is only meant to add to your educational fund because, as with any investment in the financial market, it entails a certain degree of risk. If your investments do not perform as well as anticipated, your fund value may be negatively affected and possibly result in losses or remain the same. This may be due to several reasons, including extreme downward market volatility, charges when policy is surrendered before its maturity, withdrawals and corresponding withdrawal charges, and others. In other words, fund values are not guaranteed. This is why it is important to regularly check your policy and fund performance as well as ensuring you have other sources for your college funds. But still, it remains to be a good vehicle due to the financial protection and growth it provides. As someone who will provide for your children, the protection brought by the investment-linked life insurance will surely be helpful. Your children's education and future are worth every peso you earn and save.