MANILA, Philippines – The Capital Market Development Council (CMDC) is studying the possibility of creating a child trust fund that would support the tertiary education of children from qualified poor families, the Department of Finance (DOF) said Tuesday.
The DOF said the proposal eyes sourcing the fund from the national and local government units’ contribution. The trust fund will be managed by financial institutions.
“The fund can also either be managed by the government and a part of it can also be cut out to be managed by the private sector,” said National Treasurer Rosalia de Leon, who also acts as treasurer of the CMDC.
“We are still on an exploratory stage and we would like to further do a more detailed or granular study on the CTF and to sell it to the Council in the coming meetings,” she added.
The proceeds from the child trust fund can also be used for daily allowances, transportation expenses, board and lodging and other miscellaneous expenses of public school students.
De Leon said the concept was adopted from the child trust funds implemented in the United Kingdom and Singapore.
In the UK, more than six million child trust fund tax-free accounts were set up to prepare for future educational expenses or for any other purpose that would benefit children born between Sept. 1, 2002 and Jan. 2, 2011.
An initial seed money of 250 or 500 British pounds per child was provided by the UK government and the accumulated amount can be withdrawn once the children reach 18 years of age.
Meanwhile, in Singapore, the government contributes a total of 4,000 Singapore dollars over ten schooling years of primary and secondary education of each child-beneficiary under its Edusave Scheme, which automatically covers all 7-year old Singaporeans.
With no withdrawal restrictions, the beneficiaries can take out money from their accounts even before their maturity, provided that they use the proceeds for educational purposes. The government closes each account and transfers the unused fund balance once the child-beneficiary reaches 16 years of age.
Aside from providing an education fund for poor families’ children, the child trust fund also aims to revive the “savings culture” in the country, according to Consuelo Garcia, Liaison Director for Capital Markets of FINEX.
“It is actually to be the missing link to what we have right now. The PERA (Personal Equity and Retirement Account (PERA) is for the working class. This one is for the young people. The baby boomers already got left behind so I think we could have this as a starting point,” she said.
De Leon noted that a survey done by the Philippine Statistics Authority (PSA) in 2017 showed that around 18 percent of out-of-school youths have cited financial woes as their main hindrance to getting an education, despite a conditional cash transfer program being implemented by the government.
She said the CTF will provide a solution to one of the hindrances to the country’s commitments to the United Nations’ Sustainable Development Goals (SDGs), of which the fourth one is Quality Education.