Which one is superior between Education Insurance and Education Savings?

Every parent aspires to provide the best for their children, especially when it comes to education. To ensure a secure future for their children's education, it is essential to plan for educational funding. Hence, you may have already started arranging educational funds using financial products such as education insurance or education savings. However, it's crucial to remember that these two products have significant differences.

According to information from the Financial Services Authority (OJK), here are the distinctions:

Education Insurance: Its primary function is to safeguard educational funds. This product is typically issued by insurance companies, or in banks, by agents selling insurance products. The premiums for education insurance consist of various components, including insurance costs, investments, and others, with premium values aligned with the policy. Education insurance provides assurance if parents can no longer provide financial support due to death or total disability. It is usually more suitable for long-term goals, extending beyond five years.

Education Savings: Its purpose is to securely store educational funds. Parents only need to open a bank account with deposits according to their capacity. This savings fund can be withdrawn according to the predetermined time frame. The benefits include interest and deposits guaranteed by the Deposit Insurance Corporation (LPS), resulting in lower and safer risks. Education savings are suitable for short or medium-term goals.

From the explanations above, both products have their respective advantages, but the choice depends on the needs and financial capabilities of each individual. However, it is advisable to consider investment as a means of preparing for educational funds. Investment can take various forms, such as mutual funds, money markets, fixed income, mixed funds, and stocks, especially if the educational goal spans more than ten years.

Additionally, life insurance is essential to protect the family's income. Although education insurance exists, it is still advisable to consider life insurance or income protection insurance. Life insurance provides protection if the head of the family passes away or becomes totally disabled, ensuring that children can still receive an education.

It's important to note that education insurance may not be recommended, as the available funds often do not meet the actual educational costs. Therefore, it is better to invest and combine it with life insurance protection to achieve better educational goals.

In conclusion, it is advisable to start planning for educational funds early, even from the first income earned. However, if you haven't started yet, it's never too late to begin this planning. By doing so, you can avoid heavy financial burdens in the future and rely more on investment returns rather than regular savings. The initial step can involve investing in mutual funds, among other strategies.