What Are the Best Money Saving / insurance Plans or Options for Child’s Future?

Let us consider all the possible options and then decide on the possibilities:

SIPs

SIPs are mutual fund plans in which the applicant pays a fixed amount every month for a fixed period of time. Ideally, SIPs are invested when the child is small as it invests money in equity/ debt markets or a mix of both. Early investment in SIPs helps you accumulate the corpus fund for your child’s education.

Fixed deposits (FD)

In fixed deposit, a fixed amount is deposited with the bank for a fixed period at specified interest rate. The interest can accumulate with the deposit or can be credited in your bank account separately. Banks offer attractive interest rates on FD. In case of premature withdrawals, bank might charge fees on it.

Child saving account

Banks are offering saving accounts in the name of children with attractive interest rates. Few banks offer to invest money above a certain limit from the children’s bank account. You can also give standing instructions to the bank for transferring a fixed amount every month.

PPF

Public provident fund is one of the oldest and safest for investing money for your child. You can start investing by a minimum of Rs.500 and can go up to a maximum of Rs.1.5 lac per year. A PPF account has a lock in period of 15 years. However, you can withdraw after the end of 5th year with some restrictions. As it is regulated by government, it is considered to be the safest.

Term insurance for yourself

Where the inflow of income is low and uncertain, you can secure your child’s future by buying yourself a term insurance plan. In term insurance plan, you can buy a policy for a fixed term at low premiums and a high sum assured. Once the term gets over, the applicant gets no money in return and the insurance cover too expires.

Child insurance plan

Child insurance plans are one of the best options to secure your child’s future as well as provide them with financial protection from unfortunate situations like demise of a parent.

Things to keep in mind while buying a child plan:

Sum Assured

Typically, the sum assured should be over 10 times your income. However, arriving at the sum assured is very important as you should take into account factors like future cost of education and inflation to ensure the adequacy of sum assured.

Mode of payment

Premium can be paid at fixed intervals like annually or twice a year or every quarter. Also, insurance companies offer child plans with single premium. You can select the mode of payment at your convenience and financial stability.

Policy Term

Period of policy should be based on the age of the child and an estimated age up to which he will need funds. A child plan is taken for a period till the child turns 18 or 21 years of age.

Ideally, there are two types of children plan, traditional plan or ULIP plan. In a traditional plan, the money is invested in debt market whereas in ULIPs, a specified % of the premium amount is invested in debt market while the balance is invested in equity market.

Benefits of investing in a child insurance plan are:

Various Riders

Riders are add-ons to the existing plan which provide additional coverage. Few riders like premium waiver and payment of sum assured to the nominee in the event of parent’s demise enhances the child insurance plan.

Flexibility to get money at crucial milestones

Insurance companies offering child plans provide the flexibility to the policy holder in a way that he can receive money at frequent intervals and not after the maturity of policy. This feature gives push to the child’s education when he is at crucial phase of career.

Helps to build a corpus for the child’s education

With the ever rising education cost, it is quite oblivious of you to be worried of how you will fund the money for his higher education. Child plans will help you create this corpus as they provide attractive returns on investments.

Insuring the child’s future financially is one of the your most important goal and to attain it, you should compare plans available online as it gives you a clearer picture of the offers provided by various insurance companies. There are various websites which provide details and compare plans offered by insurance companies.