As parents, you want many things for your child – happiness, health, and a secure financial future. You also want that your child should excel in his/her career.
Just imagine your kiddo becoming a star athlete or a budding biologist or a successful entrepreneur who appears in headlines from time to time. Your joy will know no bounds!
However, when you want to provide the best of everything to your child, you will have to move beyond the basic parenting skills and contribute to his/her holistic growth. For that purpose, it is sensible to save money for your child’s future and keep him/her financially secure, even in your absence.
A good way to start is to invest in an Online Savings Plan, popularly known as ‘Child Investment Plan’. An online savings plan serves the dual purpose of investment and insurance. Most importantly, it fulfils two major requirements:
- It secures your child’s future financially
- It provides financial aid at various stages of your child’s life such as higher education, starting a business, or getting married
However, with several child investment plans available in the market today, it can become difficult to choose the plan that best meets your child’s needs. Following tips will help you make an informed decision:
Determine the Monetary Value Attached to Your Child’s Dreams
As a responsible parent, your first step should be identifying and prioritizing your child’s goals and the monetary value attached to them. The two main goals for which you would need significant financial funding is your child’s education and marriage.
As far as education is considered, for the time being, decide your child’s goal on behalf him/her and know for sure when the cash is required. Reach a decision, for instance – “I am saving for my son’s engineering degree in 2025, and I may require 20 lakhs for the same”.
Along these lines, calculate the required funds while taking into consideration the year of the requirement for the respective milestones. Also, with respect to your child’s education, don’t just consider funds for primary and higher education, but also plan for extracurricular activities.
In short, make estimates of the amount you intend to spend on your child’s education or marriage. Doing so will help you choose the premium amount and the policy term for the best child investment plan.
If you have a higher risk appetite for equities and a considerable investment time frame (more than 10 years), you can consider opting for an online savings plan. It is essentially a unit-linked child investment plan that offers you investment as well as insurance feature in a single product. Further, this plan provides multiple investment options like equity, debt and balanced funds.
So, if you have a longer investment timeframe, you can go for equity funds as investing in equities for longer duration gives the best returns. On the other hand, if you have a lower appetite, you can go for an online savings plan that offers a balanced mix of growth and debt funds.
Remember that just choosing to invest for your child is not enough. Selecting the right investment plan is most important! Therefore, while making your investment decision consider the amount you can spare for investment, your income, cost of higher education, time in hand, and the level of risk.
Look for Premium Waiver Benefit
Almost all insurers, including Max Life Insurance, offer child plans with premium waiver benefit as a key feature of the base plan. This benefit acts as the most vital feature in case of demise of the parent. In such a situation, the child plan pays a lump sum amount to the nominee. Further, the insurer waives off all future premium, and the plan continues to be active until the entire policy term. This ensures that the maturity benefit remains intact as planned.
Check for Provision of Partial Withdrawals
Online saving plans also allow partial withdrawals on fixed intervals. The idea behind such partial withdrawals is to allow parents to meet the financial needs of their kids at the key milestones in their life such as admissions for extracurricular activities, admissions in educational institutions, or marriage. This option is also helpful for meeting unplanned expenses in case of medical emergencies.
Other Factors to Consider for Child Investment Planning
- Start investing early. It will help achieve your investment target easily. Also, ‘Power of Compounding’ will play an important role when it comes to investing for your child’s future
- Know the different premium payment modes. You can opt to pay premiums on monthly, quarterly, half-yearly or annual basis
- Invest in a plan that offers a well-balanced mix of equity and debt funds
- Track your investment at regular intervals and make appropriate changes if required
- Select a tax-efficient investment option
Today many insurers have come up with attractive child investment plans. However, you need to be judicious about what plan you want to opt for. Also, while making your decision don’t forget to consider criteria like time horizon and age of your child.
We hope that this guide will help you choose the right plan for your child and make his or her dreams a reality!