Child Education Fund: How Much to Save & How to Plan

Building a child education fund? Every parent wants to give their child the right education, but the cost of studying — locally or overseas — keeps climbing, often well beyond what families expect. Whether your child heads to university in Hong Kong or abroad, preparing early is one of the best ways to ease the financial burden later.The hard part is knowing where to start: how much you actually need, when to begin, and which tool is best — a time deposit, bonds, funds, or education fund insurance. There's no single answer; it depends on your child's study timetable and your family's finances.This guide estimates local and overseas study costs, shows how education inflation affects your target, and sets out a simple 4-step plan to work out how much you need — then compares the main savings tools, including what to look for in savings insurance.

A child education fund is money parents set aside in advance to meet their child’s future education costs. The expenses aren’t limited to tuition — they can also include local or overseas study costs, interest classes and extracurricular activities.

Unlike general savings, an education fund has a clear goal and a fixed timeline. Parents typically work backwards from the age their child enters university to set the contribution period and target amount, and because the money is earmarked, it generally shouldn’t be dipped into along the way, so as not to disrupt the plan.

For more effective management, consider setting up a separate education fund account, kept apart from day-to-day spending. This keeps the money from being used elsewhere and makes it easier to track progress and check that the plan is on course to hit its target on time.

Estimating the cost of studying locally

For local study, the main costs are university tuition, miscellaneous fees, textbooks and daily living expenses. Even in the primary and secondary years before university, recurring costs such as textbooks shouldn’t be overlooked.

According to a 2024 Consumer Council survey, average book expenses for primary and secondary students in the 2024/25 school year rose 3.6% and 4.3% year-on-year respectively — above the 2.0% inflation rate over the same period. Some education-related costs may therefore rise faster than overall prices, so build in a suitable buffer when estimating your fund.

Estimating the cost of studying overseas

For overseas study, costs vary considerably by destination, type of institution, subject, accommodation and exchange rates. Below is an overview of the approximate annual cost (tuition plus living costs) for four popular destinations among Hong Kong students — the UK, US, Australia and Canada — for initial budgeting:

Don't overlook education inflation

When estimating your target, don’t simply base it on today’s tuition. Some education-related costs may rise faster than overall inflation, so planning only against current figures risks a funding gap by the time your child studies. Factor in education inflation and build in a buffer.

If you plan to send your child overseas, also consider exchange-rate risk. Tuition and living costs are in foreign currency, and currency movements directly affect the Hong Kong dollar amount you’ll need — so leave a buffer and keep an eye on exchange-rate trends and remittance costs.

1. Set a clear savings goal

First, set a clear goal. Working backwards from your child’s current age and expected study stage gives you the contribution period and target amount. For example, a 5-year-old planning for university at 18 means about a 13-year horizon; combine that with your budgeted local or overseas costs, factor in education inflation, and you arrive at a realistic target. The more specific the goal, the easier it is to build a monthly plan around it.

2. Start as early as possible

An education fund is best set up early. The earlier you start, the longer your capital compounds, the more pronounced the effect, and the lighter the monthly burden.

A simple illustration: to build a fund over 18 years, a parent starting from birth can spread contributions over about 18 years; waiting until the child is 10 shortens that to about 8 years, noticeably raising the monthly amount while cutting the time the money has to grow. Starting early both lightens the monthly load and gives your money more time to build up.

3. Match the tools to your risk tolerance

Choose tools by your risk tolerance and how far off you’ll need the money. Generally, the longer until you draw on the funds, the more time a portfolio has to ride out short-term swings; even so, the mix should reflect your finances, investment experience and risk tolerance. As your child nears university and the drawdown date approaches, shift gradually toward more conservative tools to reduce volatility and the risk of a downturn just when you need the money.

4. Review and adjust regularly

An education fund isn’t set-and-forget. Review it at least once a year, checking three things: whether actual growth is meeting the target, whether the portfolio needs rebalancing, and whether projected costs and inflation assumptions still hold. If your child’s study plans change (say, local to overseas), reassess the target and contributions promptly to keep the plan aligned with real needs.

In summary, planning a child education fund breaks into four steps: set a clear target based on your child’s age, study destination and education inflation; start early to use compounding to ease the monthly burden; choose tools by horizon and risk tolerance, shifting to a conservative mix as the study date nears; and review progress regularly, adjusting for changes in costs, inflation and plans.

Insurance products marketed specifically as “education funds” are now rare; parents generally prepare their reserve using a mix of tools — savings insurance, time deposits, bonds or funds. When choosing education fund insurance in the form of a savings plan, first understand the split between guaranteed and non-guaranteed benefits, and the policy’s cash value in the year you expect to draw on the money.

Savings insurance benefits generally include both guaranteed and non-guaranteed portions. The figures in a benefit illustration may include non-guaranteed benefits and don’t equate to a guaranteed return, so compare guaranteed benefits, non-guaranteed benefits, and surrender or withdrawal values for different years separately.

Non-guaranteed benefits of a participating policy are affected by the insurer’s investment strategy and performance, claims experience and operating costs, so the amount actually paid may come in above or below the illustration — and in extreme cases, the non-guaranteed portion can fall to zero.

You can also refer to the fulfilment ratio published by insurers to see how a product has performed in paying non-guaranteed benefits. It compares the total non-guaranteed benefits actually paid across all relevant policies against the total illustrated at the point of sale; a figure close to 100% means past payouts were close to what was illustrated. But it only reflects past performance — it doesn’t guarantee future results and shouldn’t be the sole basis for choosing a policy.

The Insurance Authority caps the illustrated internal rate of return for participating policies: 6% for Hong Kong dollar policies and 6.5% for non-Hong Kong dollar policies. This cap applies only to the illustration at the point of sale — it doesn’t guarantee the actual return, nor cap it. Before buying, review guaranteed benefits, non-guaranteed benefits, fulfilment ratio, liquidity and surrender risk together.

In summary, when choosing an education fund savings plan, compare guaranteed and non-guaranteed benefits, future cash values, liquidity and surrender risk rather than relying on illustrated returns alone. The fulfilment ratio can show how closely past non-guaranteed payouts matched projections, but it does not guarantee future performance.

First, make sure your family’s basic protection (such as medical and life insurance) is already adequate. An education fund is a medium-to-long-term goal, but if the breadwinner is hit by a sudden illness or accident, it’s basic protection that safeguards the whole plan.

Second, stay within your means. Contributions shouldn’t eat into your emergency reserve — consider keeping around 3 to 6 months of household expenses as a contingency fund, to avoid being forced into an early surrender (and a loss) under sudden pressure.

Finally, read the fine print — paying particular attention to early surrender terms (the surrender cash value may be far below premiums paid), premium holiday conditions, and currency risk on a foreign-currency policy — to ensure the terms fit your finances and education plan.

If you decide to use savings insurance for your education fund, the following points can help you choose a plan that suits your needs:

- Suited to parents who value long-term savings discipline and a guaranteed-benefit component — savings insurance generally carries guaranteed benefits, and some plans also offer non-guaranteed benefits. Consider it as one tool within an overall education reserve, paired with other savings or investment approaches.

- Match the study timetable — compare the policy’s guaranteed cash value, non-guaranteed benefits and withdrawable amount in the year you expect to draw on the money, and confirm they line up with your child’s timetable. An early or large partial surrender may return less than the premiums paid.

- Choose a payment mode that fits the family budget — savings insurance generally offers terms such as single premium, 5 years or 10 years; choose by your cash flow. Most important is to stay within your means: contributions shouldn’t squeeze daily spending or the emergency reserve.

LionTycoon Beyond 2 Insurance Plan is a long-term savings and participating life insurance plan underwritten by Generali Life (Hong Kong) Limited that offers high projected returns to help you achieve your financial aspirations, while providing flexibility in passing down wealth. Parents can weigh whether to include it in their overall education reserve, based on the family’s savings horizon, liquidity needs, risk tolerance and their child’s study timetable.

Terminal Dividend Lock-in Options (subject to policy year)

- With LionTycoon Beyond 2 Insurance Plan, you benefit from Guaranteed Cash Value, and from the 15th Policy Anniversary you may apply for the Terminal Dividend Lock-in Options¹ to secure the projected returns from the Terminal Dividend² at that time.

- You can either allocate the locked-in Terminal Dividend to the Benefit Accumulation Account for non-guaranteed interest accumulation³, or cash it out. As a non-guaranteed benefit, the Terminal Dividend and the lock-in options carry policy-year and application conditions, so confirm the exercise timing fits your child’s study plans before applying.

Flexible withdrawals to match different education stages

- You may partially surrender the policy⁴ — automatically on an annual interval or manually — to cash out from the policy, with various cash withdrawal options available to support your financial needs at different education stages.

- A partial surrender reduces the Guaranteed Cash Value, Terminal Dividend and certain benefits proportionately; the actual withdrawable amount and its impact are governed by the policy provisions.

More flexible contribution arrangements

- To enhance financial security, LionTycoon Beyond 2 Insurance Plan also offers the Extended Grace Period Option⁵, under which the grace period for unpaid premiums can be extended up to 180 days; premiums continue to accrue, and any unpaid premiums must be settled before the extended grace period ends.

- The Premium Holiday Option⁶ lets eligible policies enjoy up to 2 years of premium holiday for short-term contribution flexibility. A premium holiday is not a premium waiver, and applications must meet the relevant conditions; when it begins, supplementary benefits are also terminated — see the policy provisions for details.

Legacy planning and arrangements for multiple children

- You can pass on your policy to future generations through the Legacy Planning Option (Change of Insured and Policy Continuation), subject to the policy provisions, Generali’s approval and prevailing administrative rules, helping preserve your wealth across generations.

- Through the Policy Split Option — from the 3rd policy anniversary or the end of the premium payment term (whichever is later), and subject to the relevant terms, Generali’s approval and prevailing administrative rules — the policy can be split into multiple policies, which can be used to set aside a separate education reserve for each child.