Saving money for their children

Many parents want to save money for the future needs of their children, e.g. education. They asked me if a life insurance policy is suitable for this purpose.

In my book on financial planning, I have recommended that the rate of savings be 25% of the earnings (and this 25% include any saving in CPF that is not used for housing). This saving for future needs can be used for emergencies (due to loss of employment or disability), medical expenses, education, and retirement. The savings is best invested in a low cost investment fund (such as the STI ETF) and should be kept flexible. A life insurance policy is rigid and high cost and does not suit this purpose.

Each time that you decide on the use of your long term savings, you have to consider if it is an appropriate use of the money. You should avoid spending too much of the money on education, if it leads to insufficient savings for retirement. Always consider the need to spend this money and if there are other better options that are less costly.

You can buy my book on financial planning online.