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Endowment Insurance as an Investment Tool

We have recently an acute discussion with my friends ¬– we discussed investing in children. All participants of the discussion are adults who have established themselves in business and life. Each of us became a parent in a conscious and mature manner. Therefore, we discussed not the investment of time and love – we had a unanimous opinion on this and there was nothing to argue about. We discussed money. Do growing children need an active financial support? Should we pay for their education, hobbies, first attempts in business? Or is it just getting in the way? Will the parental money deprive a child of independence or become a barrier to child’s self-actualization? Or is this an absolute benefit? What, in the end, does this give to the parents? Finally, we came to a consensus. And I want to share it and perhaps continue the discussion.
Endowment Insurance as an Investment Tool

Written by Inna Belyanskaya, a member of the Management Board of MetLife JSC (source:

To begin with, any investment assumes a return. And the answer to the question Should I invest? depends on what you expect in return. When we talk about investing in children, there are two typical answers about the expected result.

1. I am investing and my child will help me in my old age. Not everyone can openly admit such expectations, although they are quite typical for our society. Moreover, this model currently works. We help our parents and often completely strange elderly people, because we see that it is very difficult for them to survive with the current amount of pensions, and sometimes impossible without our help. But does it mean that this should be the case in the future?

As a person working in the life insurance market for sixteen years, I am sure, it shouldn’t. Everyone should and can save by the retirement date on his or her own. Moreover, any of us may once need a financial aid before our children are given a start in life. At least, because parents now give birth to children later, often at the age of 30 and older rather than at 20. The average age of a Ukrainian mother at the birth of a child was 27.4 years old in 2015-2016, and this parameter is constantly growing. Ten years ago it was a bit more than 22 years old.

With this trend, it takes a longer time for children to grow up: here is the transition to a 12-year school system, and the general trend of a long life "under the parent wing" – until 24 years old on average. In addition, 25% of the Ukrainians today dream that their children learn and build a career in the EU that means becoming a professional and gaining financial independence can take even more time. Before a child grows up, gets education, and starts earning money, his or her parents may already need a financial support. And it is highly questionable whether a young person can provide such support. Won’t this interfere with his or her own plans? Do parents need an investment with such a result?

2. I am investing and my child can fulfill himself or herself. It is an absolutely different answer and different expectations. And here is the most discussions arise – do children need parents’ money for actual self-actualization? Can the money hurt?

In my personal opinion, such investment is 100% necessary, although they do not guarantee any success. You should invest in your children, at least because it will be much more difficult for them to fulfill themselves without our support. One would think of the open world, free access to information, the opportunity to earn even in teenage years. What is the challenge? Why should we invest then?

There are three reasons why the money is necessary:

  1. temporary work for students and teenagers changes its sense. Of course, they can earn extra money while studying to go through a certain "school of life", appreciate the efforts of adults and the opportunities provided by a good education. But taking into account the future changes, when a simple routine work loses its significance, the skills gained at such work are unlikely to be useful. So, is it worth wasting the tender years on such work? It is much more effective to combine studies with practical internship or volunteer work. It should be born in mind that this is generally a matter of gaining experience, not earnings.
  2. our children will learn for a much longer time than we do. They will have to change jobs, areas, and do it often literally for all their life; according to various estimates, 7-9 times in their career. According to sociologists, they may not work as an accountant or a lawyer for all their life, and develop within a single job. Every time they will have to start from scratch, and we still do not even know in which areas! Studies, even if they are free of charge, take time and effort. Much time to learn, not earn ... Do they need a financial support in this situation?
  3. our children will have no universal income. However, they are likely to compete or cooperate in their job, studies or creative work with those who have such income – with children from different economically better developed countries. The boundaries have been erased; the employment market has become global. But to integrate into it successfully, they require a resource at the start, including a financial resource – at least for good books, studies at university, equipment for a creative mini-studio or launching an IT start-up.

If you realize that you should invest in your children without expecting a "return on investment" in your old age, a new question arises: how? It is not always possible to do with current expenses; it is necessary to save, make a capital for the future.

Of course, as a representative of the insurance market, I cannot be impartial – I am 100% sure that the endowment insurance is the best solution. Definitely, this is not the only, but mandatory instrument for the family. After all, it certainly guarantees that "investment plans" of parents will definitely come true: even if they can no longer be with their child, or their health at some point would not allow them to make and save money. But the formation of a "child capital" is another story, which can be discussed in the next op-ed column.

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