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Financial planning for your child’s future

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Parents these days get more and more ambitious with each passing year regarding the career of their child. They wish their child to excel in whatever career path they choose. But, you need to have funds to let your kid pursue higher education or to spend on any other such major activity. Your saving will not be sufficient after 10 years due to rapidly increasing inflation rate.

As you grow old, you might not have the same capability to earn the way you can do it now. You need to find out a financial instrument that can compound your savings and can help you finance your child’s education in later years of your life. You should plan keeping in mind the unfortunate events that might happen so that nothing would be able to hamper your child from pursuing his or her dreams. You need to start investing as early as possible as this way your investment will multiply and give you better returns.

What is Child Plan?

It is insurance cum investment plan that secures your child’s future financially by financing the major points of his or her life such as education and marriage. The best child plan protects the future of your child in case of your sudden death. The plan also builds a corpus that can be used over a time to finance the prime moments of his or her life.

Various Options to Invest Your Funds in-

1. Insurance-

There are various options available from which you can opt for the child plan that suits your requirements the most. You can do with savings for a defined phase of life; however insurance will help you cover all phases of your child’s life. You can choose other insurance options as well like term life insurance plan and investment insurance plan. Study various insurance plans and choose the one that is suitable to you.

For example, if your budget is low, you can choose term plan as it allows you to secure your family’s future at an affordable price. If you do not wish to mix insurance and investment, then term plan is the best for you. If you invest with a long term perspective, you can choose investment insurance plan which adjust your risk factor.

Child Insurance Plans Available in India

Child Plans  Entry age Maximum Maturity age Minimum Annual Premium Minimum Sum assured
Bajaj Allianz Young Assure 18 – 50 years  60 years N/A 10 times Annualized premium
Birla Sun Life Insurance Vision Star Plus 18 – 55years 75 years N/A Rs. 1.00,000
Max Life Shiksha Life Super 21 – 50 years 65 years Rs. 25000/- Rs. 50000/-
ICICI Pru Smart kid Assure plan 20 – 60 years 75 years Rs. 15000/-

 

5times the annual premium
Aegon Life EduCare Advantage Insurance Plan 20 – 60 years 75 years N/A Rs. 100000/-
MetLife Smart Child Plan 18 – 55 years N/A Rs. 18000/- 10 times annual premium
Shriram New Shrividya Plan 18 50 years 70 years N/A Rs. 100000/-
Bharti AXA Life Child Advantage Plan 18 – 55 years 65 years N/A Rs. 25000/-
HDFC SL YoungStar Super Premium 30 – 60 years 75 years Rs. 24000/- Subject to underwriting
Exide Life MeraAshirvaad Plan 21 – 50 years 65 years N/A Rs. 3.5 Lakhs
SBI Life Smart champ Insurance Plan 21 – 50 years 70 years Rs. 6000/- Rs. 1 lakhs
Edelweiss Tokio Life Edu Save Plan 18 – 45 years 60 years Rs. 6968/- Rs.225000/-
Aviva Young Scholar Advantage Plan (Child Education Plan) 21 – 45 years 60 years 10 – 25 years 10 times the annual premium
Future Generali Assured Education Plan (Child Education Plan) 21 – 50 years 67 years Minimum : 17 years minus the age of the child N/A
MetLife College Plan (Child Education Plan) 20 – 45 years 69 years 12 – 24 years Rs. 2,12,040/-
SBI Life Smart Scholar (Child Education Plan) 18 – 57 years 65 Years 8 – 25 years 10/7 times the annual premium (regular pay) 1.25 times single premium (single pay)

2. Mutual Funds-

This does not provide life coverage, but provides the returns that are market linked. You can choose the mix of investment funds on the basis of your risk taking factor. You need to study the market trends carefully and be careful while investing as a wrong selection can make you lose your money.
These are for those people who do not have any professional knowledge of stock market for managing funds or do not have the time to track the financial market movement. Mutual funds are a diversified investment tool. You can expect the return of 12 to 18 per cent per annum if you buy mutual funds for a longer duration.

3. Public Provident Fund (PPF)-

Public Provident Fund is for those who wish to invest in secure as well as less inflation affected product. You need to keep the tenure of at least 15 years to reap benefits.

Conclusion-

You can invest in any financial product and allocate your funds as per your long term goals. Have an appropriate portfolio of funds by diversifying the products. Planning in advance is always effective whether you plan for your child or for your other needs. Manage your portfolio considering a high risk fund and one with moderate or low risk profile at the same time. Add funds that yield fixed returns and are not influenced by market. This way you can balance your portfolio and you can also tolerate if high risk profileis generating losses.

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