Yes, you are here, and I know what you are thinking. That the best education fund for a child is the one with the highest projected returns.
Let me change your mind by saying my ideal education fund for children in Kenya. The ideal education fund is the one that helps parents consistently save toward their child’s education goal while protecting that goal against life’s uncertainties.
That education fund, therefore, cannot be a money market fund, Sacco savings, normal bank savings, unit trusts, and fixed deposits. It can only be education savings life insurance policies. That is my pure recommendation, qualified and tested by time.
However, for the purposes of allowing alternative take, whether qualified or not, I will list all the possible education funds for education and look carefully what they offer and why they fit or not fit to be a great education fund for children by subjecting them to a checklist that I will introduce below in a few seconds.
Many alternative funds promise growth, but not all offer the same level of certainty, discipline, or protection. The “best” fund depends on more than returns alone.
What Makes an Education Fund the “Best”?
A fund can be classified as the best education fund for a child if it qualifies this checklist.
The fund must:
- Consistent Long-Term Growth
Building an education fund is a long term goal. And for that reason, the fund should have consistent long term growth in order to adequately cover school fees and related costs such as school uniforms and school supplies.
Growth is also very important to cancel out inflation over the long term. It makes sure that the money you save today will have the same or more purchase power in order to afford the same basket of goods and services, or even a bigger basket.
- Affordability
Another important aspect of an education fund is affordability.
The monthly or regular contributions should be manageable helping you to guarantee the future education of your children.
- Flexibility
The fund should be flexible enough in a way that you can adjust the monthly/regular contributions if circumstances change.
- Protection of the Education Goal
An education fund should be able to protect your education goal, whether you are there or not.
If it cannot do that, it falls flat. Life is full of uncertainties and we need to plan accordingly to counter these uncertainties.
- Saving Discipline
n education fund should instil in you a savings discipline.
If not, what is the purpose. It should put you on track helping you achieve the long term goal of educating your kids.
Now, let’s jump into the most popular funds that can be considered eligible to build an education fund.
I shall subject them to the above checklist or evaluation criteria and see whether they will hold.
Popular Education Fund Options for Parents In Kenya
- Regular Savings Account
Regular savings bank accounts are perfect as they offer a means to save to your financial goals.
They allow easy access to your saved funds and are low risk.
With them, you cannot lose your saved money.
However, despite them being easily accessible and low risk, they offer low growth and are unable to cushion your money against inflation.
This makes them terrible for building an education fund.
I rule them outrightly due to their low growth rate, inflation risk, and their inability to offer protect to your long-term education goal.
They also do not instill a savings discipline and this will make you not achieve your goal of raising future school fees and related costs.
- Money Market Funds
Despite being subjected to withholding tax, money market fund offers better returns than normal savings accounts.
They are relatively low risk and hard to loose your money.
However, in a sluggish economy, returns may not keep pace with rising education costs over long periods.
Again, they do not instill a savings discipline and do not offer protection to your long-term future education goal.
For those reasons, I rule them out. The money market fund is not suitable for building an education fund.
They are best suited for short-term goals where you put your money as you prepare the ground to implement that financial goal you have.
- Unit Trust and Mutual Funds
Unit trust and mutual funds have growth potential and offer diversification of your funds.
They also attract medium to high investment risk due to their nature.
Despite having entry minimums and accessibility charges, they can withstand inflation and have the capability for standing up to the challenge of rising an education fund.
However, I would not recommend them for raising a future education fund, especially if you do not have huge lumpsums of money.
In a sluggish economy, they are subject to low returns and flactutions and do not have a built-in protection for the child’s education goal.
- Fixed Deposits
Fixed deposit are predictable and very low risk, but offer very low return rates.
Another limitation of fixed deposit is that you must have a lumpsum that you commit for a specific period of time.
For their limited flexibility, unffordability, low return rates, and lack of built-in protection towards building an education fund, I do not recommend them.
They can’t keep up to inflation in the long run and it is an old way of preserving wealth.
- Education Savings Life Insurance Policies
If you allow me, I will definitely recommend that you seriously consider education savings life insurance plans for building a long-term and guaranteed education fund for your children.
Education policies are structured savings approach meaning the amount you contribute regularly (monthly/quarterly/semi-annually/yearly) are determined at the beginning of your contribution period and the size of your education fund is declared before you begin.
You commit to what you already know. The amounts you contribute regularly instill a savings discipline encouraging a long-term commitment.
Education savings insurance policies have benefits well outlined and when these benefits will be paid.
A good example is Boresha Elimu and Msingi Poa Education Plans. These education policy calculators wil help you build and education fund depending on the levels you want to cover.
Many life insurance education plans provide protection if a parent passes away or suffers permanent disability due to accident or sickness.
The benefits are paid when due and you stop paying contributions from when the unfortunate, unforeseen event occurs.
They offer great returns designed as premium holiday in the last policy term years, therefore countering inflation.
During the premium holiday years, you do not pay premiums and the education funds starts trickling in to provide for school fees and related costs.
Despite education insurance policies being one of the most ideal plans for raising a future education fund, they require long-term commitment, from 4 to 18 years depending on your education goal.
Since the they are comprehensively structured, it is important to understand policy terms and benefits.
Why Protection Matters When Saving for Education
When building for a long-term education fund for your children, protection is one the most important factor.
Any fund without protection against unforeseen events is your life fails terribly. Protection is the differentiator.
- Education Funding Is More Than an Investment Goal
Education plans often span 4 to 18 years, and they are about protecting your young ones so that they can receive proper quality education, whether you are there or not.
Education policy is as much about love as it is about an investment goal.
- The Risk Most Parents Overlook
Most parents overlook loss of income due to death or disability due to illness or accident.
Life has a lot of unforeseen events. Education insurance policies take into account of these events that might make a parent lose income and be unable to educate their loved ones.
- Combining Savings and Protection
Education savings insurance policies are designed to offer both aspects.
Great returns as well as life protection against permanent disability due to sickness or accident and death.
Besides paying the maturity payouts at the agreed intervals, they can also pay extra benefits immediately once any of the unforeseen events occurs in parents life at a cost of a few shilling.
Table Comparing Education Fund Options Side by Side
| Aspect | Education Savings Life Policy | Savings Account | Money Market Fund | Unit Trust |
|---|---|---|---|---|
| Growth Potential | Moderate | Low | Low – moderate | Moderate – High |
| Market Risk | Low – Medium | Low | Low | Medium-High |
| Saving Discipline | High | Low | Low | Low |
| Education Protection | Yes | No | No | No |
| Long-Term Commitment | High | Low | Low | Low |
| Affordable | Affordable | Affordable | Affordable | Minimum barriers to entry |
Who Should Consider an Education Savings Life Insurance Policy?
Most parents in Kenya qualify for an education policy. If you are:
- Seeking a structured savings
- Concerned about family financial security
- Looking for a dedicated education plan
- Prefer market predictably over market volatility
- Financially stable and you want to protect that stability in the long term
How to Choose the Right Education Fund
When you choosing for the right education fund for your children, you should the following carefully.
- Consider your chils’s age
- Evaluate your risk tolerance
- Access the need for protection against unforeseen life events
- Compare fees and benefits so that you place the right amounts with inflation considered
- Review withdrawal and payout terms
Despite openly advocating for education life insurance policies, no single education fund is perfect for every family.
Again, as a professional financial advisor, you need to have a well-rounded financial life. And in that light, savings accounts, money market funds, and investment funds all have a role.
However, parents should also consider whether their education strategy protects the goal itself, not just the money being saved
For families seeking a combination of disciplined saving and financial protection, education savings life insurance policies are worth considering, carefully.
