As a parent, you want to provide the best future for your children. This can be quite a demanding task with the rising inflation and changing lifestyle. Most items and objects that are associated with your daily life have continued to become more and more expensive over the years including housing, fuel, clothing and common foods like pulses, vegetables and eggs.
The rising cost of inflation may make it very tough for the coming generations to manage the varied demands of their lifestyles. However, you have the opportunity right now to work towards making it easier for your children in the future. By planning in advance and investing your money smartly, you can indeed secure your children’s future and help them fulfil their dreams.
Why is it important to save for your children?
Saving for your children can make a big difference in their lives. Most importantly, the rising costs due to inflation can be beaten with the right planning. Furthermore, a corpus can protect your children from any financial disasters in case of an emergency.
Ultimately, by saving for your children now, you will be helping them in almost all important periods of their lives. From the quality of education that they receive to becoming independent and starting something of their own, saving for your children provides them with a solid foundation that boosts their confidence. The money that you save for them acts as a safety blanket and helps them start their adult lives in the best manner possible.
How do children savings plan work?
Saving plans for children offer you two main benefits. These plans help you save money for your children’s future needs and also help protect them financially in case of an unfortunate event. Here is an example to show you how these plans work:
Sachin bought a children savings plan and invested regularly to save for his daughter’s college education. At the end of the policy term, Sachin can use the maturity amount to pay for her further studies. In case something unfortunate happens to Sachin during the policy term, the claim amount will help to ensure that his daughter can continue with her education and fulfil her dreams.
Key benefits of children savings plans
There are several benefits of children savings plans, such as:
- Dual advantage of savings and life cover: These plans offer the dual benefit of savings and life insurance. They help you save for your children’s future and, at the same time, ensure their financial security in case of an unfortunate event
- Emergency funds: These plans can be used in case of a financial emergency. They let you make partial withdrawals that you can use for any immediate needs
- Financial security: In case of an unfortunate event, savings plans for children provide a lump sum payment in the form of the claim amount. Additionally, the plan continues to be active and the life insurance company takes care of all future premium payments. The payout received at the end of the policy term ensures that your children’s dreams are fulfilled, no matter what
- Tax* benefits: These plans also offer tax benefits on the premiums paid up to ₹ 1.5 lakh in a financial year under Section 80C. The payout received at the end of the policy term is also tax-exempt* under Section 10(10D) of the Income Tax Act, 1961
The right time to start saving for your children
The right time to start saving is now as the benefits of starting to save early are manifold. The sooner you start saving, the more you can provide for your children eventually. Time is your greatest ally, and even if you save small amounts now, they will automatically accumulate into a large corpus over time. The returns that will be generated on any investment that you make now may increase in the long run – that’s the power of compounding and you need to take full advantage of it. It is a prudent decision to start saving for your children as soon as possible. In this way, you can ensure that every financial aspect of their lives is accounted for. However, it is never too late to start saving. Even if you start saving in your children’s formative years (1-8 years), you can accumulate enough money to help them once they grow older and their expenses increase.
Key milestones you need to plan for
There will be many important milestones in your children’s lives that you need to plan and save for. These include:
- School Education: School fees are a major expense that one needs to account for. Although the fees of top schools can often be quite expensive, it is every parent’s top priority to get their children admitted to the best. Ultimately, good schooling is instrumental in preparing your children for a successful future. So, you must invest in it as much as you can.
- Higher Education: Higher education can be quite expensive in our country#. Specialist courses like engineering and medical science often have higher fees. Moreover, many children nowadays are choosing more off-beat career options like music or other performance arts. Since this is a relatively new trend in India, there aren’t many colleges that can match the expertise and infrastructure provided by colleges abroad. If your children decide to opt for such a course, you may have to send them overseas for further education sooner or later. As a parent, you need to support your children’s choices and passions, and having a financial plan will enable you to do just that.
- Marriage: Marriage is one of the most important milestones in a person’s life. Your children might decide to get married early in life when they have just started out with their careers. At this stage they might require your assistance in taking care of their marriage expenses. Even if they decide to get married at a later stage, every parent wishes to support their children emotionally and financially as they start a new chapter of their life. Ultimately, a child’s marriage is a very special occasion for any parent and you want to celebrate it in the best possible way without sparing any expenses or making any compromises. That is why it is important to plan and save towards your children’s marriage.
Savings options for your children
There are a plethora of options available to help you save for your children’s future. Choosing the right option from all the available ones depends on the kind of corpus you are trying to build and the amount of money you can commit to putting away regularly towards it.- For instance, if you want your children to have ready finances available to them when they become adults, you can set up a fixed deposit account for them. On the other hand, if you want to save specifically towards their education, an education plan is what you should opt for.
Here are some options worth considering:
- Term insurance plan: A term insurance plan is a very common insurance policy used by people to secure their children’s future. In the event of your unfortunate demise, your children receive a lump sum amount to help with their future expenses like education costs and more.
- Savings plans: You can invest in an insurance policy for your child that offers life insurance along with a savings plan. For instance, ICICI Pru Guaranteed Income for Tomorrow is an insurance policy that helps you secure your children’s future by offering financial protection through guaranteed savings` as well as life cover.
- ULIPs: Investing in a ULIP is a smart investment decision you can make for your children because it secures their financial future and at the same time your money may keep growing. The ICICI Pru Smart Life is one such investment plan that lets you choose from 13 funds as per your children’s specific needs. It also provides rewards^ for staying invested for a long duration and gives you an option to withdraw money when you need it+. These features can help you to be financially prepared for your children’s various education goals and provide life cover to your loved ones.
Tips to save money for your children’s future
Here are some valuable tips on how you can save money for your children’s future:
- Start early: When it comes to saving for your children, time and consistency are your greatest allies.
- Be regular: Always deposit small amounts as and when you can, instead of waiting until you have a large amount.
- Look for added benefits: When opting for a life insurance plan, look for a company that offers added benefits at no extra cost.
- Don’t exceed your budget: The amount that you decide to save for your children should fit comfortably within your budget.