Right... but why that? Do they think there's a problem with his education specifically? Why not give him cash and let him put it in an education fund, or a pension fund, or whatever he wants? Why say 'and you'll want to use this to increase your education'? Like buying him a voucher for a facelift.

The US values education quite a bit (I suspect other places do too, but I can only speak for US experience), and there's a long history of rewarding children with educational funds for all kinds of things. This is very commonplace.

As to why it's commonplace, well, if the family can afford to send the kid to college, then this is basically the same as giving them cash, since the family now gets to do what they want with the money they would have spent on his college. And if they couldn't afford to send him to college, now they can (or now they have a bit more help with it, depending on how much money was given). It looks good for the company too, since no one (except possibly you) thinks giving a kid an educational fund is a bad thing. Finally, by having such an educational stipulation, it hopefully prevents the parents (or legal guardians) from spending or wasting it on other things so that the kid ultimately reaps the benefits, which I think is prudent.

I believe he's receiving cash separately from the college fund.

A college fund is a common way to acknowledge that a teenager often isn't the best judge of how to spend an influx of cash. Heck, if all of my employee bonuses over the years had been added to my retirement fund instead of my checking account, I'd be in much better shape.

I do not think anyone offering to contribute to a tuition fund are trying to insult the person.

I can also imagine that putting the money in a fund have a lot of tax related benefits for both the persons giving and recieving the fund compared to paying it out in cash.

I don't think any parents or child is going to look that gift horse in the mouth.