According to the Federal State Statistics Service, the average monthly wages in Russia for the third quarter of 2017 amounted to 37,723 rubles, which is 5.5% higher compared to the same period in 2016. At the same time, the minimum payment for tuition in M.V. Lomonossov Moscow State University in 2017 was 310,000 rubles per year; the cost of the bachelor's program of Moscow State University of Foreign Affairs in "International Relations" for the current academic year is 530 000 rubles, in N.E. Bauman MSTU in "Applied Mathematics and Informatics" - 206 380 rubles.
It turns out that the average Russian citizen cannot pay for the child's education in the leading universities of the country. Prestigious education, even on credit, creates a significant burden on the family budget. It is obvious that in these realities most Russian parents have no other way than to create savings for their children for the future.
Insurance for the future
During recent years, the proposals appeared in the market, which are positioned exactly as instruments for parents, who want to create capital for their child. The above mentioned is primarily concerning universal life insurance. "Virtually any insurance company has such options in the product line with the ability to customize the product flexibly for the client: you can choose the desired period, the frequency of contributions, the scheme of savings payment after reaching of the specified age (for example, there are programs providing annual payments of a part of the amount accumulated to the child during his studying in the university) and so on," – as Katerina Mileeva describes the parameters of the programs.
Universal life insurance (ULI) works according to the following scheme. One of the parents enters into an agreement with insurance company, indicating the child as the insured. You can choose a period and the amount of regular contributions (insurance premiums) acceptable for the family’s budget. The company invests the contributions received, forming additional income, which together with the insurance amount specified in the contract will be paid at the end of the program.
The advantage of the ULI is in protection of family budget in the event of unforeseen circumstances by insurance amounts for each of the risks included into the program. "If a child is injured at school and needs care, the insurer will compensate for the loss of parents in the salary," explains the General Director of RGS Zhizn’, Evgeniy Gurevich.
The guarantee of payment is preserved even if something unexpected happens with the parent and the transfer of contributions ceases. The expert adds that recently functionality of universal life insurance programs has been actively expanding due to the new options. For example, it can be a protection not only for the child, but also for the insured for a wide range of risks, including protection against deathfull diseases.
In comparison with other savings methods, for example, deposits, ULI programs have such advantages such tax incentives (tax deduction of 13%) and a high level of legal protection of investments: funds directed to purchase of an insurance policy is not subject to penalties and arrests, are not included in the composition of divisible property. The beneficiaries that are listed in the policy cannot be challenged. The inheritance under the policy is paid to the specified beneficiary without waiting for 6 months and so on.
Meanwhile, the products of the ULI have their disadvantages. “It is necessary to understand that this is a life and health insurance policy, and it is in the first place, and accumulation is only an additional option,” explains Vladimir Savenok. “At the same time, the accumulation conditions here are not very attractive: the returns rate is very low and it is quite possible that after the expiry of the program the client will receive less than he invested." Insurance and savings can be combined with two programs: life risks and health insurance (it will be much cheaper) and investing in another, more profitable strategy, concludes Savenok.
The Deputy General Director of Finam JSC, Yaroslav Kabakov, indicates the lack of flexibility in managing funds and inability to influence asset management decisions among the minuses of such programs. "In addition, upon early termination of the agreement a part of funds will be lost. Let me remind you that investment policies are not insured by the state program as deposits, and this moment must also be taken into account,"- adds the expert.
Nevertheless, universal insurance can be used as a component of the investment portfolio, as experts share one view. Natalya Smirnova recommends making a parent both an insurant and an insured, since it is the ability of the adult to determine the process of accumulation. "If parents are 100% sure that the child will study in Russia, then contributions can be made in rubles. If you are not sure, it's better to make contributions in currency. The insurance amount must be in the amount of the minimum required for training. The term – up to entering the university by a child," she says.
When drafting a contract, you must take into account the following risks: disability for any reason, dangerous diseases, and exemption from payment of contributions. Then, upon occurrence of an insured event, the program will continue to be valid at the expense of insurance company contributions.
Expert advice
- Prior to making a decision regarding investing, you need to formulate for yourself the following main tasks: term of funds allocation, the desired level of capital protection, acceptable risks, expected return, as well as liquidity requirements for the instrument - whether, for example, there is a need for regular payments or possibility of early sale of the instrument.
- Care must be taken in order to understand all the terms and conditions of the product prior purchasing it. Do not rely on information obtained from only one source, for example, from a representative of the bank. Ideally, you need to compare the offers of several banks to make a sensible choice.
- It is necessary to think through the tax consequences associated with a particular instrument.
- The terms of the agreement should be studied in detail. You can involve financial advisers to help you to understand the terms and specifics. As there can be very much nuances, it is difficult to identify the most important and necessary thing. For example, upon entering an insurance agreement, you need to look at the exceptions to the payments and the insurance rules. Upon entering into a brokerage service agreement, make sure that you have a license and clarify the service tariffs.
- The key to success is regularity of portfolio replenishment. Let your monthly premiums be small, but regular.
- Do not use high-risk instruments (for example, crypto-currencies).
- It is necessary to teach the child how to handle money effectively, otherwise all investments will be ineffective.
