Selecting Investment To Prepare For Children Education Fund

On February 3 last, I was in Semarang for NOVA's invitation to give seminars on how to design children's education budget. Although this topic I've written before in NOVA No. 642 and 643, I felt up whenever this topic will remain interesting when discussed.

The seminar consisted of two sessions. The first session discussed the importance of preparing children's education funds and how to calculate its budget. While the second session is specifically to train the participants how they can calculate their own budget for the education of their children.

Before the first session ended, I get a lot of questions about what investment products are "appropriate" in preparing children's education fund. Even when the rest of seminars (coffee break), there is only participant who approached me and asked whether the investment in these products and is profitable or not.

Because of that, it occurred to me to discuss about the preparation children's education funds, but in terms of investment products. This means that any investment products are available for the preparation of children's education fund, and what the pros and cons of each.

Let us repeat the previous bit. In preparing the children's education fund, was not only need to know about how to calculate the budget for the preparation of their education funds, but also what investment products should be selected. For example, you've done the calculations and find that you need to save as much as Rp 100 thousand per month to prepare your child's education fund. Now the question is, where money USD 100 thousand had to ditabungkan? Savings to the Bank, buy gold, buy mutual funds, insurance open education, or where else?

At NOVA earlier when writing about how to prepare the children's education fund, I was more focused on how to calculate its budget. It's not where the money should be invested. Let's discuss what investment alternatives to choose parents in preparing their children's education fund and what the pros and cons of each.

Savings Bank

This product is a product of the most frequently selected parents in preparing their children's education fund. The process is easy: you live to the bank, open a savings account, and put your money into it. At this time, the bank interest rate is around 8 Â 9 percent per year. Interest, will be deducted for taxes. If your balance is USD 7.5 million to the bottom, then the tax you pay is 15 percent of the flowers. But if the balance of your savings over USD 7.5 million, the tax you pay is 20 percent of the flowers.

What's the advantage if you use this product as an investment tool for the preparation of your child's education fund? Obviously the money that you enter will not be reduced. This is because the investment returns you earn on savings is uncertain, which is about 8-9 percent per year before taxes. Well, that's me know so maybe you thought. But it is only the excess that's all. There are no other advantages.

The downside? If you're saving money regularly every month, then when you die, regular savings deposits you usually do threatened to stop. For example, you save as much as Rp 100 thousand per month to savings. Currency USD 100 thousand was derived from your income every month. Well, when you die, then your income will stop. If your income stops, stop also the deposit of USD 100 thousand was. Right? If the deposit you stop, then the education fund that you prepare threatened will not be fulfilled later.

Hence comes the name Education Savings products. This product is actually the same as regular savings products, it's just that these savings are covered by life insurance. How does it work? Simple: You deposit a certain amount of money each month. When you die, then the regular savings deposit you usually do will be replaced by a third party (in this case the insurance company), so that education funding will still be available later. It's just note that these products typically provide rates lower than rates on regular savings. Perhaps because this product is also protected by life insurance.

Deposits

If you want to save for your child at once (lump sum), then can you make a deposit of alternative investment products. But if you want to save money on a monthly basis to say   USD 100 thousand per month, it will be difficult to open a deposit. The reason, most banks require a minimum amount of Rp 1 million to open a deposit.

What's the benefit when opening deposit? This product is almost equal to the savings, only the interest rate you get bigger. At this time, deposit rates are around 11-12 percent per year. Only yes it was, most banks require a minimum amount of Rp 1 million to open a deposit. So if your balance has reached around Rp 1 million, it would not hurt you enter into a deposit to get a larger interest than savings rates.

It's just not as savings deposits that can be taken at any time. In the deposit, your money will be locked for a certain period. But if you're saving for children's education fund preparation, of course this is not a problem. After all, the new money will you take when your child will attend school. So my advice, if the balance in your savings account has reached the amount of USD 1 million or more, should move into the deposit to obtain higher yields than savings.

Ground

If you have a number of large funds, you could invest in preparation for your child's education by buying a plot of land.

What are the benefits if you buy the land for the preparation of children's education? In the long run, the investment results that generally you can get on the ground can be quite large. Numbers vary. But in the long run could be about 30 percent a year. The reason is because the population continues to rise, while not increasing the amount of land.

But keep in mind that the land is not always easy for resale. Therefore, do not buy the land if it was your preparation time gap is still below 10 years. For example, if indeed you want to set up college funds for your child who was 7 years old again, it would be very unwise if you make an investment through the soil. Thus, the results on the ground can indeed great, but it generally results could be obtained only in the long term, not short term. Of course, this long-term assumptions may differ between me and you. But in my opinion, points above the 10-year safe enough to be called the long term.

Gold

You can also choose to invest for children's education by buying gold. At this time, the price of one gram of gold varies. If you want to save for say   USD 300 thousand per month, and the price of one gram of gold is USD 60 thousand per gram, then you can buy 5 grams of gold per month.

But if the note, gold is generally only going up in the event of certain conditions. There are three conditions that could make the gold price rises: (1) increasing price of the dollar, (2) rising prices of goods and services in general or inflation, and (3) social unrest.

If the three conditions above are not happening, in terms of normal circumstances only, it generally increases the price of gold will be mediocre. In fact, the price might be down. Well, too bad huh? But yes that's why I suggested that the gold be the last option only if you want to prepare your child's education fund by buying gold. Wong if the normal price of gold will rise only slightly kok. The magnitude, yes, at most only 5 per cent a year.

Insurance Education

The way that the education of insurance work like this: You pay premiums to a certain amount (can be every month, three months, six or 12 months), and when your child into the level-specific education level (usually starting from the elementary and junior high, high school and Higher Education), you will get the amount of education funding in the amount varies.

Education insurance excess, when you die, then the amount of educational funds promised by the insurance company will still be given, even if you no longer pay the premiums.

How did it go? If counted counted, investment results that you get education on insurance may be smaller (in some insurance companies may be the same) compared to savings in the bank. Just compensation is that you (as parent) will receive life insurance where this is necessary for preparing your children's education funds, life insurance because the role here is to protect the risk of death at you.

Mutual Funds

You can also save yourself by opening a mutual fund account. Mutual fund is a form of investment where your money will be managed by an investment management company, and you will get a progress report every one or a few months. The description of the mutual funds you can read in the NOVA no. 666 and 667.

Excess Investment Fund is that in general the results you can get can be better than the bank's products. This is because your investment is managed by an investment management team and your money will be invested not only in bank products (such as savings and time deposits), but also on financial products who can give the potential for greater profits, such as SBI, bonds or shares .

What shortcomings when used for mutual fund investing your child's education? Well, if you die the world, routine deposits that you enter into mutual funds threatened to stop, so that your child's education fund at risk will not be able available in time later. Therefore, it can be anticipated by way of taking Life insurance. So, besides saving money into mutual funds, you also have life insurance.

Hopefully, after learning the intricacies quick investment products as well as the strengths and weaknesses, you can decide for yourself which products you should use to prepare your child's education fund. As for the seminar in Semarang, I hope someday to return again to share another topic that is not less interesting.