Oni: How Parents Can Easily Fund the Education of their Children

Head, Trust Services/Legal, STL Trustees Limited, Mr. Akin Oni, spoke on how parents can successfully take care of the education of their children and why his firm introduced a product to assist them in achieving that. Nume Ekeghe brings the excerpts:

Can you explain in detail the unique features and benefits of the STL Children Education Trust compared to other educational savings plans?

Let us start with the question: Why did we design this product for public subscription? You will agree with me that topmost on the mind of every parent is the success of their children in life and it all starts with solid education. This product is to lay a solid foundation for the future success of our clients’ children. It ensures that the education of our clients’ children is not truncated or distorted for whatever reason while they are alive or when they pass on. There are of course different ways of provisioning for children’s education. Some do it in form of savings, whilst some make investment in assets and instrument for future sales.

However, none of these ways of investing in children’s education avails the parents the benefits that STL Children Education Trust (CET) offers. The unique benefit of STL Children Education Trust compared with other educational savings plans is the Trust feature which means that the Trustee would be able to disburse without any hindrance whether the parents are alive or not. Unlike the savings where the beneficiary has no access to the fund until a certain age and the fund has to be probated in case of demise of the parents before the beneficiary is of age, in case of demise of any of our subscribers, STL Trustees would immediately step into the role of a sponsor within the limits of the funds accumulated under the product and ensure that the student (beneficiary)’s education is funded (school fees, paid and educational materials, procured)

How does the Trust ensure the invested funds grow and keep pace with the rising cost of education?

The fund under Trust is not left idle. It is invested to grow the value of the Trust and generate return which in turn is compounded into the Trust year after year. STL Trustees has the technical knowledge of instruments appropriate for a Trust Fund. We also hold our clients and subscribers the fiduciary duty of care to choose the instrument that best suits the purpose.

What are the different investment options available within the Trust, and how can clients choose the one that best suits their risk tolerance and goals?

At STL Trustees, we have put in place an investment policy primarily to ensure the safety of the funds and also for classification of qualified instruments and acceptable returns based on the tenor of the Trust and the risk appetite of the Settlors. Savvy Settlors in some cases are also allowed to be involved in investment decision making.

What are the flexibility options available for starting and managing a Children Education Trust, such as contribution amounts and frequency?

There are provisions for lump sum for those whose goal is to take advantage of the Trust feature of the product. Our subscribers could also set up the Trust or subscribe to the product with a discounted amount of what is required of them in the future with the assurance that the balance would be met with the future earnings on the fund under Trust. There is another arrangement for periodic replenishment of the fund under Trust based on the income capacity of the Settlor. This could be monthly, quarterly, half yearly etc. Do you offer investment options within the Trust that are specifically designed to hedge against inflation? If so, how do they work?

To hedge against inflation, there are high yield instruments for consideration. However, the safety of the Trust Fund is paramount when such instruments are considered for investment. Such instruments could be considered where the returns are guaranteed. So, we do consider the safety of the fund first above returns. It is forbidden to deplete your client’s fund under any guise.

Can you explain how the Trust adjusts its investment strategies based on economic forecasts and inflation trends?

We consider the economic outlook, both micro and macro in choosing our instruments. This determines the investment strategy for each Trust in our portfolio. Mostly, we invest in shortterm instruments, as we cannot afford to lock in the Trust Funds when the returns are low. We also consider the tenor of the Trust vis-à-vis the liquidity to meet the educational needs of the beneficiary.

Given the current economic challenges in Nigeria, are you seeing increased interest in the Children Education Trust from parents seeking to secure their child’s future?

Definitely, Yes? People can no longer rely on government for the educational needs of their children, hence they start making provisions ahead of admission, whether secondary or tertiary education. Parents are beginning to realize the peculiar advantage that Trust products provide and also the need to make projections to forestall unforeseen circumstances and to make provisions for future expenses, especially as it touches their children’s education.

Beyond the Children Education Trust, what advice would you give parents concerned about their children’s educational opportunities in the current economic climate?

The priority of every parent is the success of their children. Life is also full of uncertainties. It is better to make hay while the sun shines by making provisions for the education of their children and wards. They may acquire assets that are tradeable and have capacities to appreciate in future to take care of their children’s education. They should also convert such assets to a Trust to ensure the education of the children is not truncated by death of disability or incapacity of whatever form.

“We consider the economic outlook, both micro and macro in choosing our instruments. This determines the investment strategy for each Trust in our portfolio. Mostly, we invest in short-term instruments, as we cannot afford to lock in the Trust Funds when the returns are low.”