Children savings plans allow you to save money for your children’s future education and expenses through an investment program. This happens by depositing a monthly amount into this special kind of savings account at the bank and earning a special interest on it. Today, most Lebanese banks offer a children savings plan, which is commonly known as Bancassurance in Lebanon. These savings plans are mostly provided in USD among banks in Lebanon.
Features of children savings accounts vary from one bank to another. The key characteristics of these savings plans are:
Monthly settlement: The minimum monthly settlement differs between banks. Some banks recommend their customers to add an ascending annual rate to their monthly settlement in order to protect them against inflation, especially that these savings plans are usually long-term ones.
Interest rates: The interest rates on children savings plans are usually decided according to international markets prices and thus they could fluctuate with time. But several banks do guarantee you a minimum interest rate at the beginning of your plan period.
Plan period: In most banks, saving can start the moment your child is born and thus the period could normally stretch up to 18 years, when the child starts his/her college.
Insurance: Most children savings plans in Lebanon provide you with life insurance coverage along with the plan. Commonly, the beneficiary would be your child.
Let’s say you have a 1 year old child, and you subscribe to the plan with a monthly premium of 50 USD. Let us consider that you add your settlement by 2% every year in order to compensate for yearly inflation. When your child becomes 18 years old, you would have paid a total of 12,000 USD. Assuming that the bank guarantees a 5% yearly interest rate, your child’s end of period sum would be around 18,700 USD.
What if you decide to stop the savings plan before the end of the agreed period? This could be due to many reasons: monthly payments, loan settlements, family needs, etc. The procedure here differs between banks in Lebanon, but most banks allow you to withdraw the whole amount that you paid, in addition to an interest. Consequently, you may have to pay a small penalty for breaking the contract. Make sure you ask your bank about this point, while applying for a children savings plan. For more info on Children saving plans in Lebanese banks, visit the “Savings Plans” tab onBnooki.com.