The first distinction we have to make is the difference between a school insurance policy and an investment in education. Although both can be paid through monthly premiums and both are meant to secure the future education of your child, the situation at the death of a child is different.
An education investment plan is primarily intended for the permanent education of your child, from the moment they go to school until they graduate from the university, ready to start life. On the other hand, a school insurance plan will provide amounts on a full-time basis or compensate the child on the due date and enable them to continue their studies in case of the unfortunate death of a parent. I make the distinction easy to inform you that there is a difference and you have options outside of an investment when you plan your child's education.
From your question you have referred to savings, so I am inclined to assume that you are referring to an investment plan for education. Here are a few questions to ask before you invest in a mutual fund for education:
- fees Which costs will be charged?
- contribute How much do you have to invest and how often do you have to contribute? Can other people, such as grandparents, also contribute?
- Investment options What investment options are available and do the proposed timetables & # 39; s for these options meet the timing of your children's educational needs?
- Fund purchases What can you use the savings for? Can you use them for basic, high school or tertiary studies, for example? Do they cover expenses such as clothing, laptops and excursions?
- Access to funds Which criteria must be met before you can access your money? What happens if your circumstances change and you can no longer contribute to the fund – do you lose everything you have invested, or do you have to pay a fine? How difficult is it to take your money if the priorities of your children change? For example, what happens if your children decide that they do not want to study at the higher level?
Let me now answer your question about what happens in the event that your child dies prior to adulthood. It depends. Is the investment in your name? Or the name of your child? If it is in your name, life goes on. I do not say that to a flippant, but rather to point out that in most cases the death of your child does not affect the investment. You can choose to use those funds for something else on the due date if there is a restriction period, such as in the case of donations, a common investment vehicle for educational investment.
If the investment is in the name of your child, your child is known as the policyholder or the owner of the investment. You as a parent would be the payer and authorized signatory (as long as your child is a minor). You can then make different nominations, depending on your needs in the area of estate planning. You can choose not to offer an insured life, one insured life or several insured lives. Your child can be self-confident, or you can nominate other people. If you have chosen to name one or more insured lives, the endowment will end when the last life that is insured dies. The money is paid directly to the beneficiaries. You can also nominate a beneficiary for ownership to inherit the investment and become the new policyholder if your child has died.
How much to save
When it comes to saving for education, every little bit helps. Each edge that you store is one edge that you do not have to borrow or which you have to have someone else provide. So even if you get a late start or can only save a small amount per month, you are still better off than not saving at all.
A realistic goal is to try and save a third of the expected university costs of your child. Wondering where the other two-thirds will come from? The idea is to spread the rest of the university pay costs for a lifetime to make the hefty price tag more manageable. So, while a third comes from income from the past (in the form of what you have saved), one third of the current income comes when the tuition fee has to be paid (together with scholarships and scholarships) and the last one. third of the future income (in the form of loans that you or your child later repay).
The best monthly savings is that you will stick to, so choose one that suits your budget. For many families, this is about 10% of disposable income. Beyond that, ask yourself: Who are the important people in the life of my child? Most likely, many of them will be happy to help, and there are many occasions when they can: birthdays, holidays, school graduations and other personal milestones. Have family members exchange a gift for a birthday or holiday and instead make a small contribution to the tuition fees.
If you want to check your adviser's calculations and come to an illustrative figure, just Google Teaching calculator South Africa. There are hundreds of these online tools that give you an accurate estimate of how much you need to save, over what period, against what return on investment and what fees you have to pay to reach your maturity goal realistically.