The rising cost of education has become a challenge for many parents as they plan for their children’s future. Data from Indonesia’s Central Bureau of Statistics (BPS) shows that education cost inflation reached 2.38% compared to the previous year, highlighting the importance of sound financial planning. Therefore, setting up an education savings and investment plan for your child is crucial to ensure that the necessary funds are available when needed.
Imagine, for instance, that your child is currently 3 years old and will enter kindergarten in two years. If your goal is to fund their entire educational journey up to university, starting an investment plan early is a wise decision. Based on the available timeframe, here are some investment options to consider for meeting your child’s education funding needs.
| Investment Horizon | Education Level | Duration Until Needed | Investment Options | Risk Level |
|---|---|---|---|---|
| Short-term (< 1 Year) | Kindergarten | 2 Years | Sharia Money Market Mutual Fund P2P & Crowdfunding Sharia Fintech | Low High |
| Medium-term (1-5 Years) | Primary School | 4 Years | Sharia Government Bonds (SBN Sukuk) | Low |
| Long-term (> 5 Years) | Secondary School, University | 10-16 Years | Sharia Stocks, Sharia Equity Mutual Fund | High |
To better understand these instruments, let’s explore each sharia-compliant investment option one by one.
1. Sharia Money Market Funds
Sharia Money Market Mutual Funds (RDPU Syariah) are a type of short-term sharia mutual fund, usually under one year, offering the lowest risk among all mutual fund types. If you are new to sharia-compliant investments and looking for high liquidity, this product can be a good starting point. However, RDPU Syariah is less suitable for long-term investments, as it tends to be affected by interest rate fluctuations.
2. Sharia p2p and Crowdfunding Fintech
Sharia P2P lending and crowdfunding fintech have become popular alternative investment options for child education funding. Through sharia P2P lending, investors can lend funds directly to borrowers on a profit-sharing basis, while crowdfunding allows participation in projects or businesses aligned with sharia principles. These instruments offer attractive potential returns, typically averaging between 10-15% per year, depending on the platform and risk profile of the project. Nevertheless, it’s essential for investors to carefully consider the risk aspects, especially since these investments are generally not guaranteed and require selecting trustworthy platforms.
3. Sharia Government Bond (SBN Sukuk)
Sharia Government Bonds (SBN Sukuk) provide a stable option for funding your child’s education, particularly with tenors of 2 and 4 years that suit medium-term needs. This instrument offers floating with floor returns, meaning the return rate follows interest rate movements but has a minimum limit 6.40% per year for a 2-year tenor and 6.50% per year for a 4-year tenor. This minimum threshold provides investors with a sense of security, as they receive a relatively competitive return even if interest rates drop.
4. Sharia Stocks
Stocks represent ownership in a company and can be traded, offering high potential long-term gains along with higher risk due to their fluctuating nature. Investing in stocks requires skills in fundamental and technical analysis to understand market movements and select the right stocks. It’s also essential to choose sharia-compliant stocks, which have undergone specific screening criteria. Companies in sharia stocks must not engage in activities such as gambling, prohibited trading, interest-based finance, uncertainty or gambling-based transactions (like conventional insurance), or producing or trading harmful goods. Furthermore, they must meet financial ratios—total interest-based debt must not exceed 45% of total assets, and revenue from interest and non-halal sources must not exceed 10% of total revenue. This makes sharia stocks a halal and suitable option for long-term goals, such as funding a child’s future education.
5. Sharia Equity Mutual Funds
Sharia equity mutual funds involve an investment manager who allocates at least 80% of the fund’s net assets into stocks. When investors invest in sharia equity mutual funds, their investments automatically refer to the Sharia Securities List (DES). This sharia investment instrument offers the highest potential returns compared to other types of investments in the long term (over 5 years). However, while returns are high, the risk level is also relatively higher due to the fluctuating nature of stock prices.
By diversifying your investments across these sharia-compliant instruments, you can better prepare for your child’s education expenses. As the saying goes, “don’t put all your eggs in one basket.” Diversification helps reduce the risk of significant losses if one part of your portfolio underperforms, as gains in other areas can help stabilize your overall investment performance.
Also read: Infrastructure Investment Trusts
References
Bibit. (n.d.). Dana pendidikan anak terus naik? Ini cara ngumpulinnya. Retrieved November 15, 2024, from https://blog.bibit.id/blog-1/dana-pendidikan-anak-terus-naik-ini-cara-ngumpulinnya
Direktorat Jenderal Pengelolaan Pembiayaan dan Risiko, Kementerian Keuangan Republik Indonesia. (n.d.). Tentang surat berharga negara. Retrieved November 15, 2024, from https://www.djppr.kemenkeu.go.id/tentangsuratberharganegara
Bank Mega Syariah. (n.d.). Jenis reksa dana syariah. Bank Mega Syariah. Retrieved November 15, 2024, from https://www.megasyariah.co.id/id/artikel/edukasi-tips/investasi-syariah/jenis-reksa-dana-syariah.