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Lawyer Ang Kim Lan of Goodwins Law Corp acknowledges that when she and husband Willy Ng became parents, they did not rate saving for their kids' tertiary education as their most important financial goal.
'I did not put education as top priority. Willy and I wanted to ensure that we were adequately covered in terms of insurance protection first,' recalled Ms Ang.
This was to ensure the family had enough to tide it over should anything untoward happen to the adults.
The couple, in their mid-40s, bought term and medical cover like critical illness and hospitalisation plans for themselves, and later added medical plans for their children.
Nevertheless, Ms Ang did plan for her sons' education but applied two different strategies. The older son's higher studies would be primarily funded via an insurance plan while a portfolio of unit trusts was set up for her second son.
In 1995, she bought an education plan from insurance cooperative NTUC Income for her older son Noel, now 15, when he was one year old.
'The 20-year education plan is meant for Noel's local tertiary education and it will mature when he turns 21,' she said. The monthly premium is $70 and the projected maturity sum is about $25,000.
The couple decided that for a first degree, the local education scene should be good enough as they were educated locally and went abroad for their master's degrees only after working for a few years.
When second son Joel, was born in 1997, the Asian financial crisis was just beginning so Ms Ang was not comfortable with the prospect of being tied down by fixed monthly premium payments.
She decided to hold off buying any insurance plan and did not get around to reviewing that decision until 2006.
Her financial adviser suggested she set up a portfolio of unit trusts comprising equities and bonds instead of buying an insurance plan. The adviser explained that a unit trust portfolio would yield relatively higher returns than an endowment insurance plan. Also, the investment horizon before Joel reaches 21 was a shorter 12 years, so the compounding effect accruing from an insurance plan was expected to be less.
For the balanced portfolio, the initial investment amount was $5,000 with a monthly investment sum of $100. The investment return was assumed to be about 8 per cent then and the target sum when Joel reaches 21 was about $37,000.
Ms Ang is in the process of re-evaluating her investment strategies and will make up any shortfall from her retirement funds, if necessary.
Lorna Tan
This article was first published in The Straits Times.
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