What’s the best protection for your baby?
When your baby arrives, you begin thinking of your child’s future.
Many begin by opening a bank account for the child, promising to oneself to set aside money every month for the child’s future. But realistically, with today’s low savings account interest rates of 0.2% effective rate ( after witholding tax), a thousand pesos per month is expected to grow to only ₱245,000 after 20 years ( or total interest of ₱5,000 after 20 years )
The best protection for your child is a combination of equity mutual funds in-trust-for (ITF) your baby, plus term life insurance for the breadwinner with your baby as beneficiary.
If we set up an equity mutual fund, in-trust-for your baby, assume 12% growth and invest ₱1,000 per month, we get these projected values:
- ₱1m to ₱2.3m after 20 years, or
- ₱3.5m to ₱14m after 30 years or
- ₱12m to ₱86m after 40 years!
This investment can probably suffice to fund your baby’s college tuition after 18 years, or jumpstart family life on marriage after 30 years, or provide retirement as early as 40 years!
This is a great plan, but we know that what actually happens do not always match our plan. What if you die too soon?
If the breadwinner is 31 years old or younger. ₱500 per month can buy ₱1m of life insurance coverage for 18 years.
This means that if the Lord takes you, the breadwinner, home early, and you die too soon in the next 18 years, you can leave ₱1,000,000 for your baby as a parting gift.
With this combination, you protect your baby’s future whether you die too soon, or live long enough to see your child grow!
This solution requires only ₱1,500 a month or about ₱50 per day.
Can you commit ₱50 per day for each of your children?
Ask your questions or put your comments below this.
