A Child Education plan is an investment type designed specifically for parents to meet their children’s future educational expenses. These plans offer dual benefits of insurance & investment, providing guaranteed payouts or market-linked returns. As this plan helps create wealth, it can also be considered a type of Child Saving Plan with a main objective of achieving educational goals. These plans include educational expenses, such as book costs, admission charges, & tuition fees, if any. This plan ensures access to higher education without any intervention or compromises due to financial constraints.
It offers a flexible premium payout option, i.e. monthly, semi-annually, or annually, etc. or in a lump sum. This means the lump sum amount would be received as a maturity benefit amount at the end of the policy tenure. The accumulated funds can be used to bear the child’s education & the insurance component, including life coverage. This plan offers three benefits: life cover, waiver of remaining premiums, & a lump sum payment.
Steps to Plan Your Child’s Education Better
Provided are the steps to make the child’s education better:
Step 1: Define Education Objectives
Visualise the educational path by considering certain factors such as the stage of education, relevant institutions, & any specialised courses. Defining these objectives helps provide clarity, which lets you make an informed decision & let you select an appropriate investment plan.
Step 2: Estimate the Future Education Costs
Determine the future education-related costs, considering the inflation factor.
Step 3: Open a Dedicated Education Fund
Segregate the other Child Saving Plan from the education fund, considering some of the tax saving plans such as PPF, Sukanya Samriddhi Scheme, offering certain benefits & tax advantages.
Step 4: Start Early & Leverage Compound Growth
Any small contributions made also grow in a substantial manner with the help of the power of compounding. An investor should start investing as early as possible to receive maximum returns on the investments made.
Step 5: Diversify Investments
Choose a diverse range of investments to aim for better returns & manage risks. A perfect portfolio includes a balanced mix of debt, equity, and mutual funds.
Step 6: Regularly Review & Adjust Your Plan
Review the educational plan on a periodic basis to ensure it aligns well with your financial objectives. Make adjustments to the contribution amount & investment preferences accordingly, & stay aware of the education-related costs & the market scenario to be on track.
Step 7: Leverage Tax Benefits & Government Schemes
Many government investment plans offer tax benefits to promote educational plans, hence making benefits from the plan.
Types of Child Educational Plans
Provided are the different Child Education Plan types:
ULIP Child Education Plans
Every parent wants to provide the best education to their children, for which a huge corpus of funds is required. When it comes to securing your child’s future, a ULIP-based child plan is considered to be a great option, as it helps secure your child’s financial future.
ULIP includes both investment & insurance factors, providing policyholders with dual benefits, i.e., securing their family’s financial future with financial growth. Under ULIP, a part of the premium is allocated towards life insurance & the rest towards investment. One can opt to invest in debt, equity, or both, depending upon the risk acceptance level & your financial objectives, making it an ideal investment option. It provides the flexibility to switch between the funds anytime during the policy tenure.
ULIP-based child plans help in meeting future financial obligations, such as a child’s higher education, a child’s marriage, etc.
Money Back Child Plans
A Money Back Policy is a type of life insurance that offers the dual benefit of both investment & protection. It allows you to receive returns at a regular interval of time during the policy tenure, hence providing a life coverage offering financial protection in the case of an unfortunate incident.
It involves a certain amount or percentage of the sum assured to be paid back to the policyholder at a regular interval. If the policyholder survives throughout the policy tenure, they will get the remaining amount of the sum assured &, & if the policyholder dies during the policy tenure, the full amount of the sum assured is paid back to the nominee, irrespective of the fact that the survival benefits have already been paid.
This plan can also be availed for children, which will help parents secure the financial future of their child.
Endowment-Based Child Plans
An endowment plan is a type of life insurance plan which includes a lump sum payment either on the policyholder’s death or maturity of the plan. It best suits those who are futuristic & want to look for long-term investment options & are planning for some future events, such as their retirement, their child’s marriage, etc. It is a combination of both life insurance coverage & long-term savings that offer assured returns. Under this plan, a policyholder is required to save a certain amount on a regular basis for a specified duration. If he dies, his beneficiaries will receive the entire sum assured, & if he survives, he himself will receive the survival benefits.
A Child Endowment Plan is sometimes considered to be the best for parents who are looking for a secure educational future for their children & who want to provide them with assured savings & insurance coverage. This plan enables parents to save funds to cover future expenses, such as their child’s education, marriage, or other expenses. According to this plan, the maturity benefit will be paid to the child on the occurrence of certain events & death benefits in case of the demise of the policyholder.
Conclusion
Planning a child’s education is not about saving funds, but involves laying a strong foundation for the dreams to be fulfilled. By setting the objectives, diversifying investments, starting early, & finally reviewing the plan, one can fulfil their financial objectives. If an educational plan is drafted well, it will help ensure financial security without any compromises.
Source: FG Newswire