Answer:
Endowment policies (also known as education policies) are useful if you feel you do not have the discipline to save on your own.

A contractual commitment

An endowment is basically a savings contract for a specified period, usually five or ten years. When you sign up for a policy like this you are committing yourself for the full period. You cannot elect to stop payments at will.

So if you have a financial hiccup where you are unable to pay for a while it may lapse and you stand to lose a lot of money. You need to be sure that you can commit to the entire term.

Commissions to the broker tend to be on the high side, so the returns on these investments are rather lacklustre. However, if you are the kind of person that will be tempted to dip into your savings, then an endowment will at least make sure that you keep up regular payments.

Watch out for promises of high returns (illustrated benefits). The broker will always tell you the best case scenario. Don’t be surprised if your investment does not measure up to original projections.

Liquidity and flexibility

Unit trusts are much more flexible. You can buy and sell them at will, and have the cash in hand in 48 hours.

This is more practical because school expenses are not always predictable. You should buy unit trusts with a medium- to long-term view (three to ten years).

You may be disappointed with their returns if you expect to see them grow in value in the first few months.

The downside with unit trusts is that there are many to choose from (over 300) and it is difficult for the lay person to know which ones to choose. This is where a financial advisor comes in useful. I would recommend that you consult someone before you start buying.

The costs of acquiring unit trusts are less than that of an endowment so this is also an attractive feature. Unit trusts are basically baskets of shares which means that they will increase and decrease with the stock market. Because of this, it's vital that you diversify your portfolio.