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23-09-2022 |
It is not just education but also the standard of maintaining our lifestyle, which has become more expensive over the years. Most families in India have at least one or two children, and every parent desires to give their young ones the best education and financially secure life.
Though both parents may be earning well, it may not always be enough to cover the cost of quality education and also foreign education in the future.
What Type of Investments Can Be Made for a Child?
Life Insurance Plans
When it comes to ensuring that a child has a secure future, life insurance plans offer savings benefits along with a life cover option to protect the child’s future. These are the three child insurance plans that can help you prepare for your child’s future needs:
- Unit-Linked Insurance Plan
A ULIP plan comes with a 5-year lock-in period, which aids in building a steady investment corpus for the first 5 years of the policy term. With a flexible choice of fund options, parents can choose to invest in one or more of these fund options to earn market-linked returns. Since ULIPs are quite flexible, you can choose the policy term and the premium payment term to align the investment tenure with the future financial needs of your child.
- Money-Back Insurance Plan
A money-back insurance plan offers survival benefits at regular intervals during the policy term, which can be useful in case you need to pay your child’s education fees from time to time. At the end of the policy term, the child can avail of the maturity benefits to fulfil their education and lifestyle needs. With these dual payout benefits, money-back plans can financially support your child’s needs, even in case of the demise of one or both parents.
- Endowment Insurance Plan
Child insurance plans are also available as endowment plans which can be useful for the long-term savings for your child. After the policy matures, a lump sum amount is paid out as the maturity benefit. Hence, if you are saving for your child’s further education or career aspirations 10-12 years down the line, an endowment plan lets you decide how you want to utilise the lump sum monetary benefits for your child’s future.
With Tata AIA Life Insurance, you have the liberty to select a suitable policy for your child’s dynamic needs so that money does not affect how they choose to pursue their dreams!
Other Investment Options
- Sukanya Samriddhi Yojana
The SSY is a savings scheme that allows you to save up to ₹1.5 Lakh in the scheme and can be particularly useful if you have a girl child. This investment can start as early as the girl’s childhood, before the age of 10 years and matures when the girl is 21 years of age.
The SSY investment can also be useful for saving through tax* benefits. If you have two girl children in the family, you can invest in two accounts.
- Recurring Deposits/Fixed Deposits
Fixed Deposits and Recurring Deposits are two traditional savings methods that can help build a corpus for your child if you are seeking less-risk investments. With sure returns on the investment, you can approach your bank and start an FD or an RD easily. A fixed deposit serves your purpose if you are going for long-term savings with a lump sum amount, while a recurring deposit is better suited for regular investments over a shorter term.
- Debt Mutual Funds
Though one can consider mutual fund schemes for investing in their child’s future, debt mutual funds are a good choice with risks. These funds invest in fixed income securities such as corporate debt securities, corporate bonds, government bonds and other similar money market instruments. Even though market movements may affect the returns of debt mutual funds, this can be useful for investing money in your child’s education.
- Public Provident Fund
Being a popular investment scheme that also offers apt returns, this can be a safe avenue for a long-term investment in your child’s future. You can also start with a small investment of ₹500-1000 and increase the annual investment to ₹1.5 Lakh, either through a lump sum or an instalment.
In case you need to plan additional finances for your child, you can also take a loan against the PPF account between the 3rd and 6th years of the tenure.
Which Investment Option is apt for Your Child's Future?
The needs of every child, their lifestyle and their education will be different, and parents can decide how they can aptly create an investment plan for their child. Considering that child investment plans should offer some specific benefits, a child insurance plan can be a wise option.
This is because there are additional features under child insurance plans, such as a waiver of premium benefit. This benefit comes into effect on the demise of one or both parents or any similar unfortunate event. Hence, the future premiums on the policy are waived off until the policy matures and the benefits are paid out to the child.
Child insurance plans are also quite flexible because you can align the investment with your child’s goals as per the policy term and premium payment term of your choice. This makes it easier for you to meet their financial needs through the investment while the life insurance cover protects them throughout the policy term.
Conclusion
Any investment plan, especially a child investment plan, offers better returns when the investment starts early. Hence, if you save or invest money for the child’s high school education, the investment should start before the child’s school years. Child investment plans should also be a long-term endeavour so that you can continue making further plans for the investment, as your child’s needs, dreams and goals may change over the years.
L&C/Advt/2022/Sep/2236
