Child’s Future Planning

Why do we need to plan for our child’s future? All of us have many dreams to fulfill. These dreams become more precious if they are for our loved ones. Especially if they are for our children.

We as parents always want to give our children the best, particularly when it is a question of their Education. However, with the steeply increasing cost of higher education, we need to be prepared and assured that when the time comes; our child's dreams become a reality!

Most of these goals have a price attached and unless you plan your finances carefully, you may not be able to provide the required economic support to your child when you need it the most. For example, with the increasing education, if you are not financially prepared, your child may miss an opportunity of a lifetime.

Today, a 2-year management course at an premiere management institute will cost you nearly Rs. 3,00,000 At a assumed 6% rate of inflation per annam, 20 years later, you would need almost Rs. 9,07,680 to finance your child's MBA degree.

An illustration of how education expenses could rise with passing time due to inflation.

The only way to deal with this is through systematic and regular savings.

There are various ways and means to build a financial corpus for your child. Most parents start with opening a bank account for their child; some go a step further and buy certain investment instruments or even precious metals such as gold.

Most life insurance companies offer various Child Plans (to be linked to our Young India Plan page) that that not only help you grow their money through market linked instruments, but also ensure that your child receives financial support as planned, even in your absence.

It is hence important for you to understand what each of the options have to offer and how it best works for you and your child.

• Time frame for building a corpus
• Age at which the fund would be required
• Approximate amounts to build the corpus
• Investment avenues to be considered
• The amount available to the child in case of death of parents or disability of the premium-paying parent

Child plans offered by life insurance companies are a very sensible investment to consider while making your financial plans. These plans not only provide risk coverage on your life, they also ensure that the financial requirements of your child are taken care of, thereby enabling them to fulfill their dreams…

However, please read the product brochure carefully, study the benefit illustration alongwith the various investment options and associated charges and understand how the plan can work for you. Remember, what might be the right plan for your neighbor and their children may not necessarily be the right plan for you!

• Your child will receive funds at every momentous occasion in his/her life as planned by you. Be it high school/ college/ professional course and any other life events.
• Many companies offer a money back option at critical milestones. For example, your child typically will need to enroll for college or a professional course at the age of 18 or 21 years. At this point, you will need to pay a high amount as fees. These plans ensure that you receive some of your accumulated investments at this point.
• You invest systematically over a period of time into the chosen plan. The premium paid by you is typically invested in market linked instruments (after deducting charges). These investments grow with the market over a period of time.
• In case the plan does not enable you to receive money at a defined age, most plans typically allow you to withdraw some money partially as and when required.
• Your child gets financial security even if any untoward incident results in the parent's death and/or disability.
• The insurance company typically makes a lump sum payout on death of the parent. This lump sum is known as the Sum Assured and is the insurance portion of the plan. This amount is paid either directly to the child (if above the age of 18 years) or to an appointee (if the child is a minor).
• Additionally, in most cases, the insurance company will pay the remaining premiums into the plan. This feature is common across most of the plans offered and is popularly known as the Waiver of Premium benefit. This means that the plan continues and does not end at the demise of the parent.
• The child typically receives the accumulated fund value at maturity even if the ‘Sum Assured' has been paid out on the unfortunate incident of the parent's demise.
• In case of most unit-linked child plans, you have the option to invest your premium across asset classes where you choose the proportion of your investment into each.
• Most companies offer you funds that cover various asset classes – ranging from equity to debt. You can choose the asset class based on your risk appetite.
• In case of most unit-linked child plans, you have the option to invest your premium across asset classes where you choose the proportion of your investment into each.
• Additionally, most Child Plans offered by insurance companies also offer tax benefits on the premium you invest and benefits your receive at maturity under Section 80C and 10(10D) respectively as per the Income Tax Act – 1961.