Why is my child's education plan money locked for so long?

Some savings plans sold for education run for a fixed term, such as 35 years, whatever the child's age. In this story the plan started in September 2009 when the son was one and runs to September 2044, when he is 36. It pays RM300 a year along the way and its RM10,000 lump sum only at the end. A child who joins a 35-year plan at 8 would get the lump sum at 43.

What return does an insurance education savings plan give?

In this story RM158.35 a month for 6 years, RM11,401 in total, returns RM300 a year for 35 years plus RM10,000 at the end: RM20,500 guaranteed, which works out to about 2.76% a year. Dividends are not guaranteed and are not counted.

What is a better way to save for a child's education?

Split the two jobs. Protection: here about RM40 a month for RM50,000 of critical illness cover, RM50,000 for death or total disability and RM100,000 if by accident. Savings: here RM100 a month into a unit trust share fund. At an assumed 8% a year after fees and a 5.6% sales charge, RM100 a month for 6 years could be about RM8,700 at age 18, which the family can withdraw. It is not guaranteed and can fall 30% or more in a bad year.

How much can RM100 a month grow in 35 years?

In this illustration, RM100 a month for 6 years (RM7,200 in) goes into a unit trust share fund with a 5.6% sales charge and an assumed 8% a year after fees. It could be about RM8,700 after 6 years and, left alone, about RM17,300 after 15 years, RM34,600 after 24 and RM80,700 after 35, because money growing at 8% a year doubles about every 9 years. At 4% a year it would be about RM23,900 after 35 years; at 0% about RM6,800. None of it is guaranteed. The old plan in the story pays RM20,500 in total over the same 35 years, guaranteed.

Should I cancel my old education savings plan?

Usually not without checking first. Cancelling early usually returns less than you paid, and the expensive early years may already be behind you. Ask the insurer for the surrender value and compare it with what is still to come.

What should I ask before buying an education plan?

Can my child use the money at 18? What does it pay if my child gets sick? What do I get back if I stop early? Ask for the benefit illustration, which shows the end date, the cover and the surrender value year by year.

The Wrong Way to Save for Your Children's Education

Split picture: at 18 a young man in front of a red-brick university with white columns holds a letter saying fees due Sept 2026 and an empty wallet; at 36, bearded and carrying his own baby, he holds up a RM10,000 cheque dated Sept 2044.

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The wrong way to save for your children’s education.

He needs the money at 18. His education plan pays at 36.

His mum paid RM158 a month for it.

Here’s what went wrong, and what I’d do instead.

A living room in 2009: a smiling agent in a navy blazer holds up an Education Plan brochure marked Guaranteed and says pay only 6 years, guaranteed for 35; a mother holds her baby son.

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In 2009, a friendly agent sold her an education plan.

RM158 a month, for just 6 years. Guaranteed money for 35 years.

It sounded perfect. She said yes.

The agent isn’t the villain. The plan does what it promised.

Six envelopes of RM1,900, Year 1 to Year 6, flying into a steel safe with a plate that says it opens in September 2044.

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She paid RM11,400 in 6 years. The payout was locked for 35.

Six years of paying: about RM11,400 in.

Then the plan waits. It pays out RM300 a year.

The big RM10,000 stays inside until the very end.

Her son at 18 holds a university offer letter; beside him the locked safe drips RM300 coins from a tap into a jar, tagged RM5,100 so far.

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Her son is 18 now. The plan has paid out RM5,100.

University starts this year.

The plan has dripped out RM300 a year: about RM5,100 so far.

The RM10,000 stays locked until he is 36.

A road drawn to scale from age 8 today, past a university building at age 18, to a small safe at age 43, with a bracket marking 25 years in between.

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If your child is 8 today, a 35-year plan pays at 43.

Here’s the big mistake: the lock is longer than childhood.

University comes at 18. With a 35-year plan, the money comes 25 years later.

Always check the end date before you sign.

At a kopitiam table the mother slides the old policy statement across to Ade in his NY cap and tuxedo, her 12-year-old daughter beside her.

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Before buying the same plan for her daughter, she showed it to me.

Her daughter is 12. She was about to buy the same plan again.

First she asked me: is this a good plan?

So I gave it a report card.

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Guarantee: A. Growth: D. Protection: D. Cash at 18: F.

The plan is safe. It pays what it promised.

But it grows slowly, about 2.8% a year. And it pays nothing for a serious illness.

The big money comes at 36. For an education plan, that’s a fail.

Ade holds an open umbrella tagged RM40 Protect; beside him a potted money tree tagged RM100 Grow.

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RM40 to protect. RM100 to grow. RM18 less a month.

Insurance is an umbrella. Saving is a tree.

One plan trying to be both gives you a small umbrella and a small tree.

So I split the jobs: about RM40 for protection, and RM100 into a monthly unit trust plan.

A cover comparison under two umbrellas. Old plan, a tiny umbrella in the rain: life RM10,000, serious illness RM0, accident RM10,000. New plan, a big dry umbrella: life RM50,000, serious illness RM50,000, accident RM100,000.

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For about RM40 a month: 5 times the life cover, plus illness and accident cover.

Life: RM10,000 before. RM50,000 now.

Serious illness: RM0 before. RM50,000 now.

Accident: RM10,000 before. RM100,000 now.

Protection comes first. A big illness can empty any savings.

Old plan: the locked safe drips RM1,800 into a jar by age 18. New plan: a grown money tree in a pot, tagged about RM8,700, yours at 18, under the sun.

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At 18: about RM8,700, and she can take it out. The old plan: RM1,800.

Same six years of paying.

Her savings could be about RM8,700 when she turns 18. And she can use it for university.

That’s what a small monthly amount can do when it’s left to grow.

The same roadside from age 12 to 47: a seedling today, then a money tree in a pot that doubles at each stop, tagged about RM8,700 at 18, RM17,300 at 27, RM34,600 at 36 and RM80,700 at 47. Below the road the old plan's jars fill to RM1,800, RM4,500, RM7,200 and RM20,500.

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At 47: about RM80,700 if she leaves it to grow. The old plan: RM20,500.

At 18 she can use the money. Or she can leave it alone.

Left alone at 8% a year, it doubles about every 9 years. By 47: about RM80,700.

The old plan pays RM20,500 in all. Even at 4% a year, hers still ends ahead: about RM23,900.

The money tree bends in a storm, coins blowing off its branches and a tag reading minus 30% in a bad year, while the umbrella beside it stays open.

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The honest part: the tree is not guaranteed. A bad year can cut it by 30%.

A share fund can drop a lot in a bad year. Nothing about it is guaranteed.

That’s why the umbrella comes first. And why we give the tree years, not months.

What to do when your fund falls is a story of its own.

A clipboard titled Before you sign with three ticked questions: can my child use the money at 18, what does it pay if my child gets sick, what do I get back if I stop early.

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Ask 3 questions before any education plan.

1. Can my child use the money at 18?

2. What does it pay if my child gets sick?

3. What do I get back if I stop early?

No, nothing, and less than you paid? Keep looking.

Ade in his NY cap and tuxedo holds a report card marked cash at 18 with a question mark, beside a chat bubble saying send me a photo of your statement, I'll grade it for you.

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Already have a plan like this? Don’t cancel it. Send me the statement first.

Cancelling early usually gives back less than you paid.

The costly years may already be behind you.

Send me a photo of your statement. I’ll give it a report card.

Send me your statement on WhatsApp → Or see how I work with clients

This is general information for education, not personal financial advice. The story is based on a real policy statement, with names and small details changed. The new-plan figures are illustrations: about RM40 a month for protection (an estimate; the final premium is set after applying) and RM100 a month into a unit trust share fund with a 5.6% sales charge and an assumed 8% a year after fees, which is not guaranteed. Unit prices can fall as well as rise, and past performance does not indicate future returns. Insurance cover is subject to the policy's terms, exclusions and underwriting. Do not cancel an existing policy without checking what you would lose. Speak to a licensed consultant about your own circumstances before acting. Adezeno is a licensed Unit Trust Consultant with Eastspring Investments Berhad, FiMM No. F01029300.