Every parent wants to secure the future of their kids. Which explains why I got tons of inquiries about building an educational fund for their kids. Though Sun Maxilink Prime can also be used to build the fund, Sun Maxilink Bright seems more appropriate to this kind of goal. I will explain this in the latter part of the post.
Educational Plan vs. Educational Fund
An educational plan is a pre-need product that pays a guaranteed amount as soon as your child turns at a certain age like 17 yrs. old (recall CAP?). An educational fund, on the other hand, is a fund made by parents themselves by investing on a regular basis. These include stocks, UITF, mutual fund, or VUL to generate enough cash by the time your child enters college.
When to Start Building the Educational Fund?
This is might be the first question you might ask. Suan, kailan ba dapat magsimulang gumawa ng educational fund? The perfect time to build this kind of fund is as early as your child is born. This will give you enough time to build a sufficient fund to finance the education of your kids.
Teka lang muna, bat kailangan agad? Eh di ba matagal pa naman mag cocollege si baby?
Your eyebrows might be raising right now (please pardon me) but as mentioned this will give you more time to build the fund but it doesn’t mean that you can’t build it when they are already 5 years old. But expect to set aside more money, of course.
Steps in Building an Educational Fund
Pick a School Where you want to Enroll Your Kids
The first thing you need to do is to know where you want your kids to have their college education. Just from my observation, parents tend to pick their alma mater as their primary choice. This, of course, is still subject to change.
Your kids will still have to decide exactly where they want to study but because they are still incapable to know where (they are still babies right?). This will just serve as a reference so we can start computing the cost we need to prepare in the near future.
As for me, I want my future kids to study in UP because of the quality education it provides at a very low price compared to other schools. So my computation from here will be based on my school of choice which is UP and he will take a four-year course. (Yes, I just assumed I have a son here haha!).
Calculate the Cost of Education
If you’re lucky enough to start building the plan when your cute little baby was born then probably he will be in college after 18 years.
Looking at the table above, my son will turn 18 years old in 2036 and will enter college in the same year. Due to the surprising cost of education, we must account for a yearly increase in tuition fees at the rate of 6.96% (based on CHED approved tuition fee hike school year 2017-2018 ).
If the cost of education in UP in 2016 is Php 50,000 then in 2018 it will be Php 57,138, considering an annual increase of 6.9%. The following is the computed tuition fee I need to pay from 2036 to 2039:
First Year: Php 189,900
Second Year: Php 203,003
Third Year: Php 217,010
Fourth Year: Php 231,984
Total Cost of a 4-Years Course is Php841,897
Add Other Expenses
Aside from tuition fees, we must also account for other expenses like allowances, cost of books, field trips, seminar and so on. I will skip this part for the sake of making the computation simpler but you can add this to your personal computation if you would like.
We used approximations in values so we won’t have an exact figure of the total cost. Fret not, no one really knows how much they will exactly be so spare me if I won’t add these to my computation.
Set Your Target Fund Value
After adding the tuition fees and other expenses, you will come up with an amount that will serve as your target fund. This is the amount you must have on or before your child enters college.
In my case, the amount I need is Php841,897 to be able to send my son to a 4-year course in UP.
Find an Investment Product Suitable for Your Needs
This is the last step, you must find a financial product that can satisfy your needs. There is a wide array of investment products out there that you may want to consider like the stock market, mutual fund, UITF, VUL, etc.
VUL is my personal choice in making this fund because it doesn’t just build the fund I need for my son’s education. But it also gives financial security and peace of mind to my family, Sun Maxilink Bright on this particular instance.
Life Insurance to Ensure Your Kids’ Future
Some of you might be thinking that it’s not necessary anymore to have life insurance at this point but you’re wrong. Life insurance act as a safety blanket in building the fund. It gives you peace of mind that your kids can still go to college no matter what happens to you.
Imagine that along the way of building the fund, you become totally and permanently disabled. Do you think you can still put money in the fund? No work means no pay, right? You also don’t finish the fund so it means that by the time they’re about to enter college, the accumulated fund will not be enough.
You don’t want your kids cursing at you for being unprepared. Tama ba? Of course, they love you unconditionally so you must love them the same way and life insurance can serve as proof of that love.
This is why VUL or Variable Unit-Linked plan is my recommended financial vehicle especially for those parents who still don’t have enough income protection. It can help families to build an education fund for their kids securely and efficiently through Sun Maxilink Bright.
Sun Maxilink Bright Brochure
Sun Maxilink Bright is life insurance with an investment plan that provides financial security and peace of mind while making your money grow. It is only payable for 5 years and best suited for educational fund building and other financial goals such as buying a car, house or even starting a business.
Eligibility: 18-65 years old
Minimum Insurance Coverage: Php 400,000
Mode of Payment: Yearly | Semi-Annually | Quarterly
Can you still recall my target fund if I have to send my child (imaginary for now hehe) in 2036? My target fund is Php841,897.
I’ll show you a sample quotation of Sun Maxilink Bright for myself age 25, male, non-smoker, invested in an index fund with a historical return of 10% p.a.
Annual Premium: Php 42,000
Semi-annual: Php 21,000
Quarterly: Php 10,500
Daily: Php 117 (the price of your favorite fast food meal)
Total Investment: Php 210,000
Life Insurance Benefits:
- My family will receive a lump sum of Php 400,000 when I die (please Lord don’t call me too early) and because this is specifically for the education of my son, they can put this to another investment vehicle like a mutual fund until my son is about to enter college.
- I also attached a rider or additional benefit called waiver of premiums or TDB (Total Disability Benefit) to my plan so that when I become totally and permanently disabled during the paying period Sun Life will pay the premiums on behalf of me until the 5th year. This only cost me Php572 per year and I consider this as a must-have rider in any insurance policy.
- Accidental Death Benefit or ADB adds an additional life coverage worth Php 200,000. This is the amount my family will get on top of my basic life coverage if I die due to an accident. The total amount they will receive when that happens is Php600,000 which is guaranteed amount plus the fund value of my investments (not guaranteed as market performance is unpredictable).
Grow Your Funds Over Time
If you build an education fund for your kids as early as now means you will spare yourself from financial stress when the time comes that your kids will enter college. It will also give you confidence that somehow you can give them a bright future with the help of the right financial planning.
5 years: Php233,911
10 years: Php374,019
15 years: Php600,881
18 years (2036): Php792,055
Yes, I’m able to make it (almost) and time has clearly helped me in reaching my target fund value. My total investment was only Php210,000 or with just Php3,500 per month, I can send my son to UP for a 4-years course.
How about you, when do you intend to build the educational fund for your kids? Start as early as now so your kids can have a BRIGHTer life with Sun Maxilink Bright
Protect the future of your kids with Sun Maxilink bright. Some terms are technical in nature that an ordinary person cannot understand without professional help from a Licensed Financial Advisor. I recommend a personal meeting. Don’t worry you are not required to get anything from me. You may not like it and it is perfectly fine.
Frequently Asked Questions (FAQ):
Sun Maxilink Bright is 5 years to pay life insurance with an investment plan from Sun Life. This plan is best for educational planning and other life goals like buying a car or house because the focus of the plan is wealth appreciation.
The main difference between Sun Maxilink Bright and Sun Maxilink Prime is the paying years. Because Sun Maxilink Bright is designed to be paid in just 5 years it will have more time to appreciate in value. Thus, it is better to be used in educational planning.
You can start for as low as Php 3,000 per month but it will still depend on your age and other factors.
You just need one valid ID together with your initial payment of at least one quarter or equivalent to 3 months worth of premium.
Federico is an electronics engineer, financial blogger, insurance agent, and a certified investment solicitor. A multi-awarded Sun Life financial advisor with clients ranging from lawyers, doctors, engineers, accountants, business owners, company directors, and OFWs to minimum wage earners had sought advice from him in achieving lifetime financial freedom.