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EDUCATION is an important element of a child care plan. Savings for the cost of a child's education should start early. One option is to buy insurance. The monthly premium for a child's education insurance (over 24 years) has the following inflationary trend (assuming redemption value of RM100,000):
2005: RM200
2010: RM300
2015: RM400
Every 5 years it goes up by RM100. That is RM200 in 10 years. Hence, averaging at RM20 per year, which is 10% simple average per year on the RM200 base. So if compounding, perhaps around 7% per year.
This should be the benchmark for salary increment. I don't see this happening in the near future. Tough times ahead. Hoping that insurance companies are not taking too much profits. To be fair, the insurance companies are offseting profits from life plans against losses from medical plans.
In any case, we must all put aside money for kids' education regardless of whether in insurance plan format or simply cash savings. So, please start cracking on your excel spreadsheets to work out your budget so that you can condition your lifestyle to be balanced in considering current expenditure versus future commitments.
However, don't be too stressed about it. Just make sure whatever your potential savings are on monthly basis, divide by RM400 and wallah.... that is the maximum number of kids you should have now. Any future addition (of kids) should be fine if incremental income can give incremental savings of RM400 plus RM20 per year from this year onwards.
But then..... is RM100,000 enough for education 24 years from now?
* kopihangtuah
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