When should parents start an education policy in Kenya? This is a question I get all the time. When I pose the same question to parents, some get it so well and it becomes so easy to plan for their children’s future education through an education insurance policy. Some parents have a difficulty in getting how it works.
Today I will help you plan for the future education of your children by recommending to you the best time to initiate an education policy. If you are late, I will show you the best way to recover the lost savings years.
Education costs keep on rising in Kenya mostly due to mostly inflation, change of curriculum, and advancing technology. It is, therefore, important to plan the future education costs with a tool that navigates through the increments. I recommend an education insurance policy.
Why an education insurance policy as a tool for planning long-term future education costs? An education insurance policy generates savings returns that cater for fees increments over the years and guarantees that you children get education whether there or not.
The policy features an inbuilt life protection against permanent disability due to accident or illness and has a death cover. This means that your children will get education regardless of where the life of a policyholder turns.
Since we have determined that an education policy is the way to go, it is now time to determine when is the best time to start it. This is where parents face a dilemma, whether to start it at birth or when the child is older. This article will help you understand before taking a policy.
The time you start an education insurance policy is very important because it affects the monthly contributions (premiums) or the affordability and the maturity payout (bonuses/sum assured).
What Is an Education Insurance Policy?
An education insurance policy is an endowment policy and, thus, a savings plan combined with life protection. This means that when you start an education insurance policy you are saving money to be paid at maturity with some saving returns and life protection against permanent disability and death cover.
It helps parents prepare for the future school fees and related costs.
In an education insurance policy, you save for a particular period e.g. 6, 7, or 10 years and the maturity payout is paid in terms of bonuses spread across the years for the level of education you are saving for.
For example if you adopt an education policy for IGCSE lower secondary, the level takes 3 years to complete. Now, an education insurance policy will pay bonuses spread across the three years of the IGCSE lower secondary.
One of the most suitable education policies for IGCSE and CBE education curriculum systems are Boresha Elimu and Msingi Poa.
When you become set up for an education policy, you pay contributions (premiums), and you can decide to pay those premiums monthly, quarterly, semi-annually, or yearly.
Education policies are designed to reduce financial pressure during key education stages.
Why Parents Should Start Planning Early
You should start planning for the future school fees early.
- One of the major reasons you should start planning early is inflation that keeps rising education costs. An education policy offers savings returns that cater for inflation.
- Early planning allows parents to spread contributions over many years making the burden less felt today, and when time comes, the accumulated savings plus the savings returns make you pay school fees and related costs with ease.
- Early planning protects children in case of unexpected events affecting the parent’s income. The future brings unknowns and events that might adversely affect your income. Who thought of Covid-19 that threw people off balance financially. A lot of people lost their income. Those who had education policies in place that were maturing were very lucky and the paid school with less friction.
- Late savers encounter higher contribution amounts (premiums) since the savings period shrinks significantly. Also since the savings period is short, the savings returns are lower. So, it is advisable you start early.
For example, say you are saving for CBE Senior secondary and you start when the baby is born, at zero age. Also, let’s assume you are 30 years old and put the cost of CBE Senior secondary at KES 300,000 per year (school fees and related costs)
If you start from a child’s zero age, you will save for 16 years. According to this 3-bonus education insurance policy calculator for education planning, if you save for 16 years (technically you are saving for 14 years since the last 2 years of the policy you do not pay premiums -premium holiday), you will pay a monthly contribution of KES 3,360, and you will get 3 bonuses each of KES 300,000 to cater for the 3 years of this level.
Let now assume you begin planning for the same level late, when the child is at grade 3 of CBE. That means you have lost 8 years of savings. The policy term, due to starting late, will be 8 years. You still want KES 300,000 each year. Due to lateness, you will be contributing KES 10,600 for the same maturity payout. Also, there is a huge difference in savings returns between the two plans, almost double.
Clearly, you can notice that the saving pressure is real when you start to save late. KES 3,360 vs KES 10,600 is a huge difference. In general, the earlier you start planning for your children’s future education the better.
Best Age to Start an Education Policy
The best time to start an education policy is when the child is between 0 to 3 years. At this age, the child is yet to attend any school level whether in CBC or IGCSE.
The CBE education curriculum formula is 2-6-3-3-3. 2 years PP1 and PP2, 6 year primary level, 3 years junior secondary, 3 years senior secondary, and 3 years university.
The IGCSE curriculum formula is 2-6-3-2-2-3, 2 years in kindergarten (FS1 and FS2), 6 years in primary level, 3 years in lower secondary, 2 years O-level, 2 years A-level, and 3 years university/tertially level.
So, if your child is yet to join school, this is the best time to adopt an education insurance policy. You have longer contribution periods hence minimal financial pressure from the contribution amounts and you will enjoy higher savings returns.
At this time due to the minimal financial pressure, you can place several education policies to run concurrently to raise school fees for different levels of education.
For example, you can place 3 education policies for junior secondary, senior secondary, and the tertiary level under the CBE curriculum.
Starting early is everything, but if you are late, you can still do it, but the financial pressure due to the regular contributions will be a little bit more. Here is an alternative:
Starting During Early Primary School
Another ideal time to start saving for the future education of your children is when they are the lower primary.
In this instance, you save for the levels above the primary level.
Under the CBE system, you save for the junior and senior secondary and tertiary level.
Under IGCSE, you save for lower secondary, O-level, A-level, and tertiary level.
The most ideal starting age while at primary level is when they are grade 1 to 3.
The financial pressure when you start saving at primary level is higher than when the child is at 0 to 2 years or when they are PP1/PP2/kindergarten. However, you will still accumulate substantial savings returns. This period still offers balanced affordability and savings potential
Starting in Late Primary or Junior Secondary
If you start saving at late primary, you can only target late years in senior secondary under CBE and O-level, A-level and tertiary level under IGCSE.
Savings returns might be substantial but not like saving earlier. The premium might exert financial pressure if your goal is to save enough for those levels.
These are the challenges of starting late. The reasons that might justify you starting saving this late is in case your income improves, delayed financial stability, or a catch-up plan.
Late starts are still better than having no plan at all.
Is It Ever Too Late to Start?
You can adopt an education policy even when your children are at secondary level.
But sometimes it is too late to save through an education insurance policy. Alternative methods would be:
- Investment plans
- Money Market Fund
- SACCO savings
- Short-term endowment plans
Factors That Determine the Right Time to Start
They are several factors that determine the right time to start saving for the future school fees.
- Your financial situation at the moment. If you have a strong, steady regular income, start now. If otherwise, wait until you can have some money you can put to education savings without overcommitting.
- Number of children that you have. If your family is big, start very early. Having several education policies running concurrently might exert a lot of financial pressure on you.
- The type of school you want. International and IGCSE schools have very high school fees. Start your education plan early. CBE public schools have lower school fees by far, and even if you start late, it will work out well due to the reduced regular contributions.
- The education level you expect. Some levels are very expensive e.g. the IGCSE O-level and O-level and tertiary level, especially if you are targeting foreign universities. For those expensive levels, start very early to reduce the regular contribution pressure.
Benefits of Starting an Education Policy Early
Needless to say, the benefits of starting an education policy early include:
- Lower regular contributions (premiums).
- Higher potential savings returns due to the accrued interest over a long period of time.
- Reduced stress during school transitions e.g. from junior secondary to senior secondary.
- Better financial flexibility reducing the chances of a policy lapsing.
Common Mistakes Parents Make While Starting an Education Insurance Policy
- Start too late when the child is older or at advanced levels of learning.
- Choosing unrealistic regular contributions, either over committing leading to policy lapse or under committing resulting in payouts that do not match the school fees.
- Ignoring inflation, which sometimes may push school fees way up.
- Not reviewing policies regularly. Your preferences may change e.g. a change of heart from targeting CBE to target IGCSE.
Starting early is the best strategy due to the reduced financial pressure from the regular contributions, savings returns growth, and ability to cover for many levels and bigger families.
Do not make the mistake of waiting for too late to start your education savings plan.
While I recommend starting immediately after birth, the best time ultimately depends on your financial ability and education goals.
Even parents who start late can still benefit from structured education planning and savings discipline.
The key takeaway is simple: the earlier you begin planning for education, the easier it becomes to manage rising education costs in Kenya.
