Why Educational Policies may no longer be good for you [Listen to the 2 minute video]

I still come across many people who have Education Policies. I ask them the following 2 questions;

  1. Do you know why it might be better for you to use a Tax-Free investment rather than an education policy?
  2. Do you know that growth in an education policy is taxed at 30%. This explains why many parents are disappointed with education policies as you put your money away for many years and in the end when your child goes to varsity, you find that the investment has not really grown as you would have expected.

Often, they don’t know the answers. I then go on to explain to them that a Tax-Fee investment might be a better option to use because they will pay NO tax on all the growth of their investment. Listen to this 2-minute video to find out more about tax-free investments.

What is an Education Policy?

  • It is an Endowment policy
  • It has a minimum term of 5 years but I have come across people who have endowment policies of over 10 years
  • There are penalties for early withdrawal so once you sign up for the policy, it is difficult to cancel it
  • Growth is taxed at 30%

I only give endowment policies to the following customers

  • Those who have NO financial discipline and are likely to cash the tax-free investment and not stick with it until their children go to university
  • Those with a marginal tax rate above 30%, if they have already exhausted their tax-free contribution limits
  • Those who are in business because of the Insolvency protection

Financial advice is very personal as no 2 circumstances are the same. When using a tax-free investment to save for your children’s varsity fees, I always ensure that there are plans in place to ensure that your kids’ school and university fees would be paid in the event of an untimely death or disability.

If you want to set up a tax-free investment for university fees for your children, email us

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