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From the #YOLO to the #FOMO – teenagers are more than their trendy slangs and hashtags on social media. Teenage years are probably when lifelong dreams and aspirations are born.
No parents wouldn’t want to help their child realise their potential. However, your child’s future brings about a new set of challenges, from cost of education ridden by high inflation, to your child’s health.
You can never be too extra (you may need to Google this term if you’re above 30 years old) with your child’s takaful planning.
Financially planning for your child’s future should also start as early as possible, with some as early as pregnancy itself.
No matter how many times your teenage kid complain about how you “just don’t get” them, parents know more about their kids’ needs that they let on.
Here are some of the key areas of protection that your teenage kid need:
Family Takaful
Medical/Health
Education
Future
Being the eldest child, Nadia shoulders some pressure to excel in her study and ultimately in life. The pressure becomes worse when she comes from a single-income middle-class family, because her tertiary education options can be limited due to financial constrain.
However, like any father, Adam works hard to ensure Nadia’s dreams and aspirations can be achieved to the best of his abilities.
Before he can do that, he needs to identify the risks that Nadia faces until she enters adulthood:
Unable to get into public tertiary education
Illnesses that require high cost of treatment
Accidents causing Total & Permanent Disability (TPD)
Death
Conventionally, takaful plan is only needed by people who have others dependent on their income, like Adam.
However, there are also various valid reasons why a child or a teen need a takaful plan.
If your child develops an illness that would make him/her ineligible for takaful plan later on, it's a good idea to get them covered early.
If the worst were to happen, the coverage could pay for funeral costs
The takaful benefits can be an asset for your child when he/she becomes financial independent.
The benefits can also cover student loans in the event of death or disability of the child.
Although these may seem far-fetched to you, but a takaful plan is a Plan B for your loved ones. Having said that, because a child is not earning an income, the coverage amount can be much lower than a breadwinner.
Coverage for teenagers is a little different from adults with financial dependents.
Generally, teenagers do not carry a parent’s level of financial responsibility, but there are still some practical and financial reasons why one should consider a family takaful plan for their teenage child.
There are various types of takaful plans that Adam can get for Nadia, his 14-year-old daughter:
A child rider is an addition you can make to an existing investment-linked or standalone plan. It provides a death and Total & Permanent Disability (TPD) benefit if one of the children covered on the rider passes on.
This means, Adam can subscribe to a child rider in addition to his takaful plan. However, this is not a long-term solution as a child rider typically discontinues once the child reaches a specified age, for example 15 years old.
Once the rider discontinues, you can either convert the child rider into a permanent family takaful plan or let the coverage end. In Nadia’s case, this might not be a good idea, as it will only cover her for up to one year (when she reaches age 15).
A term plan is an individual family takaful plan that provides coverage for a specific amount of time (usually 5 to 20 years). The plan can be renewed after that time has ended, but the risk is, if Nadia falls sick, it may be difficult to renew the plan, or the contribution rate may increase.
The advantage of a term plan is, it tends to be less expensive than a typical family takaful plan.
If Adam and Maria are concerned about guaranteed coverability, they can consider a family takaful plan for Nadia. It is designed to stay with an individual permanently as long as contributions are made.
Permanent takaful plans have a “maturity period” (typically at age of 70 years old).
The best thing about an investment-linked takaful plan is, you can add on riders as and when you deem necessary, according to your needs and financial situations. Some of the common riders are:
This rider covers any one of the 36 listed critical illnesses specified.
This rider covers the contribution of the takaful plan in the event of death or permanent disability of the contributor.
This rider provides coverage for accidental death or permanent dismemberment.
The amount of sum covered a parent choose for his/her teenage child depends on what he/she wants out of it and the budget.
Here are some factors to consider when you are determining the coverage amount:
| Product | Child rider | 10-year term takaful plan | A permanent family takaful plan |
| Death benefit | Minimum RM25,000 | RM100,000 | RM100,000 |
| Estimated contribution | Minimum RM50/month | RM516/year | RM200/month |
1http://funeralsmalaysia.com/en/services/muslim-funeral
2http://funeralsmalaysia.com/en/pricespromotions
When you are healthy and don’t think you need health takaful, you should be paying more attention to your health coverage options.
Despite the common misconceptions that the earlier you get your health protection plan, the cheaper it is, there are many real reasons why getting it early is beneficial for the certificate owner.
Here’s how contribution for medical takaful plans work:
Age
The younger you are, the cheaper your contribution for a medical takaful plan is. However, it does not mean you lock in your contribution for the entire coverage. As you age, your contribution will also increase. However, contribution tends to be higher for the 0 – 5 age group, as they are considered high risk3.
Gender
Contribution rate is determined through a complex underwriting process to weigh the risks an individual face. Due to factors such as life expectancy, prevalence in diseases such as breast cancer, and also pregnancy complications, females tend to have higher contribution compared to males.Estimated contribution according to age and gender4
| Age | Male Contribution | Female Contribution |
| 11-15 | RM283 | RM284 |
| 16-20 | RM348 | RM386 |
| 21-30 | RM347 | RM417 |
| 31-35 | RM347 | RM427 |
| 56-60 | RM1,100 | RM1,137 |
* Non-smoker, based on RM100 plan for Room & Board.
Terms and conditions apply
Smoking habit
It’s not a secret that smoking is bad for health. Therefore, takaful operators and insurance companies penalise smokers with higher contribution/premium.
Health
In certain cases, participants are required to go through a medical check-up before their takaful plan gets approved by the takaful operator. However, most of the time, the takaful advisor will ask you a list of health related questions, which you need to answer truthfully. If you have any pre-existing medical condition, your contribution can be costly, or exclude the condition or any related illnesses from the plan.
As a 14-year-old female, Nadia also faces minimal medical risks. However, the major health issues face by adolescents are often related to their behaviours – such as driving habits, diet and exercise – that influence health in the short and/or long term5 .
Here are some of the reasons why getting health takaful plan early on can be beneficial to a young adult like Nadia:
Ensuring protection when she is still young and healthy
Protection against accidents causing Total & Permanent Disability (TPD)
Protection against accidents causing death
Sickness can affect more than your health, even the young and seemingly health. With medical inflation estimated at 11.5% in 2016, and projected to rise to 12.7% in 2017, sickness can have an impact on your finances, too.
Although the common belief is that the younger you are, the lower you risks of being diagnosed with critical illnesses. This may not be true with today’s youth lifestyle.
Only 22.8% of youths were active
19.1% were overweight
7.9% were obese
Adolescents smokers increased to 15.2% from 11.2%
According to another study, the major cause of death in 10- to 24-year-old females in Malaysia was neoplasms (or cancer) in 20137 , whereas the major cause of death in 10- to 24-year-old males is road traffic injuries.
Teenagers are typically exposed to an environment with a lot of thrill-seeking behaviour. Here are the estimated medical costs for the following treatments for accidents and other common illnesses:
Blood test
Admission to hospital & treatments
Chemotherapy
Radiotherapy
3Mortality rates by specific age group and gender in Malaysia: Trend of 16 years, 1995 – 2010, Journal of Health Informatics in Developing Countries
4https://www.greateasterntakaful.com/content/dam/great-eastern/takaful/en/homepage/takaful-solutions/find-the-right-plan/family-takaful-protection/life-protection/i-medik/i-medik-rider-suite.pdf
5http://www.thesundaily.my/news/1381455
6 https://www.nst.com.my/news/2017/04/228008/73-msians-die-hypertension-diabetes-heart-disease-moh
7https://www.ncbi.nlm.nih.gov/pubmed/28838752
8https://www.thestar.com.my/opinion/letters/2016/01/22/reduce-cost-of-dengue-tests/
9https://www.thestar.com.my/opinion/letters/2014/07/21/absurd-charges-to-treat-dengue/
10http://www.federalgazette.agc.gov.my/outputp/pua_20131216_P.U.%20%28A%29%20358%20-%20PERINTAH%20KEMUDAHAN%20DAN%20JAGAAN%20KESIHATAN%20%28PINDAAN%20JADUAL%20KETIGA%20BELAS%29%20%202013%20%28disahkan%20oleh%20kementerian%29.pdf
Malaysia is the fifth-most expensive country to get a university education and according to a survey11 , the average working parent spends 55% of his or her salary on each child to complete higher education.
This means saving for your child’s tertiary education should start as early as possible. However, that’s easier said than done.
On top of being concerned about their retirement planning, Malaysians are also worried about their children’s future. Almost all parents in Malaysia (96%) are stressed about their children’s future, with about 67% admitting to worrying at least once a week, while half of them make supporting their children’s education as a top financial priority12.
So, how can Adam ensure Nadia, who is 14 years old, have enough to fulfil her aspirations in the future. With only five years left to save, Adam may have his work cut out for him.
How much you need to save for your child depends on where you plan to send your child to study, what kind of courses, and where he/she will be living during college.
Obviously, overseas education and courses like Medicine will cost more. Here are some of the factors that you need to consider:
Other costs that you need to factor in other than the tuition fees:
Registration fee
Cost of living
Currency fluctuation if your child is studying overseas
Assuming that Adam has already been saving for Nadia’s tertiary education in the past five years, when Nadia was only 9 years old. Here’s how much more he needs, to boost her education savings.
| Where to study? | Age to start | Estimated cost |
|---|---|---|
|
Private university in Malaysia |
18 years old |
RM80,000*13 |
* Cost of education is based on average cost and actual cost may differ. It does not include cost of living.
Terms and conditions apply.
Here’s how much Adam needs to save:
| Amount saved | RM15,000 |
|---|---|
| Nadia’s current age | 14 years old |
| Age to start higher education | 18 years old |
| Duration to save | 5 years |
| Total estimated average fees | RM80,000 |
| Estimated inflation rate | 4% per annum |
| Estimated investment rate | 5% per annum |
| Future value needed | RM97,332 |
To calculate your child’s education savings, use the Great Eastern Takaful’s Child Education Fund Takaful Calculator.
There are various ways or products available to save up for your child’s college fund. However, in the case of Nadia, if Adam has not been saving for her university education, he will only have a mere four years to come up with the money.
If saving is still an option, Adam needs to look for a Shariah-compliant education savings plan that protects his money, guarantees returns, and confers additional tax benefits
However, it’s not easy to save up a huge amount of cash in such a short period. Here are some suggestions for Adam to raise enough money in the medium-term for Nadia’s higher education fund:
PTPTN is a government institution that offers study loans specifically for tertiary education for Malaysian students.
A flat rate ujrah of 1% a shariah-compliant “fee” to help with the administrative and management costs of PTPTN will be charged). Repayment period starts 6 months after you complete your studies. Not paying back your PTPTN loan can result in blacklisting in the Central Credit Reference Information System (CCRIS).
You can start investing in unit trust funds or Shariah-compliant securities.
A unit trust fund consists of a pool of funds collected from a group of investors with similar objectives. This collective investment fund is managed full time by professional fund managers, and it typically includes equities, sukuk and assets.
Shariah-compliant securities are securities of a Bursa Malaysia-listed company which have been classified as Shariah permissible for investment.
Parents still can consider withdrawing from the EPF Account 2 to pay for their child’s education.
EPF members are allowed to withdraw their Account 2 savings14 to fund their own education, or the education of their children, stepchildren and/or legally adopted children.
It is applicable for:
A takaful education savings plan can be in the form of investment-linked or standalone plan that combines savings and takaful protection for your child.
11https://www.imoney.my/articles/malaysia-ranks-5th-most-expensive-for-varsity-degree
12https://www.imoney.my/articles/retirement-savings-priority
13https://www.greateasterntakaful.com/en/takaful-solutions/financial-tools-to-know-what-you-need/child-education-fund.html
14 http://www.kwsp.gov.my/portal/documents/10180/153718/EDUCATION_WITHDRAWAL_More_Information_20.07.2017.pdf
The number one cause of death in Malaysia for adolescents aged 15 to 19 years old is accident, while the second cause is violence 15.
Teenagers are typically exposed to an environment with a lot of thrill-seeking behaviour. This increases their risks of injuries – be it in school, at home, or on the road.
The thing about accidents is that they are unexpected, unpredictable, and often can be financially draining. The consequences of an unfortunate accident can be dramatically life changing, not just for person involved in the accident but also for his/her family.
Here are the estimated medical costs for the following treatments for accidents:
| Motorcycle accidents | Car accidents |
|---|---|
| RM18,860 | RM9,696 |
| Inpatient treatment |
|---|
| RM6,69517 |
* Based on exchange rate as at January 31,2018
Other than the cost of treatment involved after the accident, there are also various hidden costs involved, depending on the severity of the injuries.
For example, if a person is involved in a road accident, he/she may have to be rehabilitated for a period before he/she is fully recovered. This may involve:
All the above cost money and if Nadia were to unfortunately met with an accident, not only will Adam have to fork out a lump sum of cash for treatment, but he and Maria will likely have to make additional arrangements to help her in her road to recovery.
Most takaful plans can include an accidental death or injuries rider – whether it’s a standalone or investment-linked plan. The rider provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events. The definitions for violent, accidental, external and visible events vary from takaful operator to takaful operator.
15http://www.wpro.who.int/topics/adolescent_health/malaysia_fs.pdf
16http://www.freemalaysiatoday.com/category/leisure/2017/11/23/motorcycle-crashes-cause-far-more-severe-injuries-than-car-accidents/
17https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5304986/
