In Unit-linked plans, the investment risk in the investment portfolio is borne by the policyholder
As a parent, you do all that you can to secure your child’s bright future, including having a strong financial plan which keeps them financially protected even during uncertainties. Child investment plans are ideal for building up a financial reserve to fulfil the dreams of your little one. These plans ensure that you have adequate financial resources available at every milestone of your child's life. The in-built life cover2 acts as a safety net in case of an unfortunate event. Here are a few reasons why you should invest in child investment plans.
Reasons to invest in a child investment plan
Funding for children's education
While securing your child’s future, planning for higher education is crucial as your child grows, a major chunk of your savings will get spent on education. With an investment for child education, you can create the necessary funds so that your child can pursue their dream career. You can find out how much you need to save for your child's higher education using this children's education cost calculator.
Flexibility to withdraw^ part of funds
Choosing a child investment plan that allows you the flexibility to withdraw money as per your child’s needs ensures that you have easy access to a part of your money while the rest of your invested money keeps growing.
Habit of saving
Child investment plans foster a habit of disciplined savings. Regular contributions towards child investment plans help you save for various stages of life like, primary and secondary education, higher studies, wedding and many more. With proper planning, you can secure your child’s future, against all adverse situations.
Protection4 against uncertain times
Many child plans offer benefits like a waiver of premium. This ensures that future premium payments do not need to be paid in case an unfortunate event occurs. The investment continues to grow without the need to pay premiums, and provides a lump sum payout at maturity. This ensures that your child’s dreams are secured, no matter what.
Collateral for loans
An advantage of investing in child investment plans is that they can be used as collateral for a loan. If you plan to apply for a personal or education loan for your child, you can use the child plan as collateral for hassle-free loan processing.
Options for investment towards children in India
Investing for your child can help you stay financially prepared for their education, wedding, and various milestones in life. It can also help them pursue a career of their choice or start their own venture
Below are some of the key child investment plans in India:
Child Insurance Plans
Child insurance plans protect your child financially in case of any unfortunate event. These plans ensure that your child has a financial safety net in your absence. They ensure that your child is financially prepared to meet their goals, no matter what!
Unit Linked Insurance Plans (ULIPs)
ULIPs offer the dual benefit of insurance and growth of money. They enable you to save for your child's future systematically. At the same time, they offer financial support to your child in case of any unfortunate event. This ensures that your child has the necessary financial aid for education, healthcare, essential needs, and more.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a government-backed investment plan. It offers steady returns at low risk. It has a minimum tenure of 15 years, making it suitable for long-term goals like your child's higher education or other significant life events like marriage. PPF also offers tax* benefits that maximise savings.
Sukanya Samriddhi Yojna
Sukanya Samriddhi Yojna is an investment plan for your daughter. This scheme was launched under the Beti Bachao Beti Padhao initiative and is backed by the Government of India. It provides a reliable and low-risk way to accumulate funds for your daughter's higher education, marriage and many more. This plan offers tax* benefits as well.
Fixed deposit is another low-risk investment option. It allows you to deposit a lump sum amount for a fixed period and earn a fixed interest at maturity. Five-year fixed deposits also offer tax* benefits subject to conditions under Section 80C of The Income Tax Act, 1961. Fixed deposits can be suitable for your child's short to medium-term financial needs.
When investing for children, you can also consider investment options like gold. You can invest in gold through jewellery, bars, and coins. You can also virtually invest in gold Exchange-Traded Funds (ETFs) and Sovereign Gold Bonds (SGBs). Gold can protect your money against inflation. It can also offer your child financial security in the future.
With mutual funds, you can invest your money in market securities like equity, debt, and cash as per your risk appetite and goals. For instance, you can invest in debt mutual funds for low-risk stable returns or equity mutual funds that offer the potential for higher returns. You can also invest in mutual funds regularly through Systematic Investment Plans (SIPs) or as a lump sum, as per your requirements.
Benefits of investing in a child plan
Below are some benefits of investing in child investment plans:
Benefit of investment and protection
Some child investment plans like ICICI Pru SmartKid with Smart Life offer the dual benefit of life insurance and investment. These plans help you grow your wealth and provide you with a life cover2 as well.
Some Child investment plans like ICICI Pru SmartKid with Smart Life offer the below deductions** as per The Income Tax Act, 1961:
- The premiums you pay towards the plan are eligible for deductions** up to ₹ 1.5 lakh per annum under Section 80C
- The payouts received from the plan are tax-free** subject to conditions under Section 10(10D)
Lump sum amount on maturity
Some child insurance plans offer a lump sum maturity benefit at the end of the policy term. You have the flexibility to select a maturity date basis your child's milestones and needs, such as graduation, post-graduation or marriage.
Some child insurance plans allow you to make partial withdrawals after the lock-in period. This allows you to withdraw a portion of your invested money to meet any urgent financial requirement, such as school fees or medical expenses.
Takes care of your child’s education
If you have invested in a child plan, you may not need to take an education loan to support your child’s education. This will also save your child from paying the interest that comes with an education loan. By investing in a child plan, you can systematically build enough funds for your child’s future.
Child investment plans can keep you financially prepared in case of an emergency. These plans provide the option of making partial withdrawals in the case of an unforeseen event, hence, providing you a financial safety net to depend on.
Child investment plans keep you and your child financially prepared for rising education cost, unforeseen ailments, and unfortunate events. It is crucial to start planning for your child's future as early as possible. This provides a longer time-frame for your investments to grow and balances out the risks involved. It also helps in beating inflation by generating returns which are higher than the rate of inflation.
While purchasing a child plan, you need to choose your investment instrument carefully to ensure that your child stays financially secured. You can consider investing in ICICI Pru SmartKid1 child plan. It is a comprehensive plan which has a life cover2 that offers your child financial stability, protection4, and support to fulfil their dreams. It allows you to invest your money in equity and debt funds as per your risk appetite and create wealth that can benefit your kids when they need it. You can invest small sums regularly without having to bear the burden of a lump sum investment. Thus, when your child is ready, a large amount3 is also ready to fund their goals. So don’t wait any longer, invest today in your child’s future.
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1 In ULIPS, investment risk in the investment portfolio is borne by the policy holder.
2 Life Cover is the benefit payable on death of the life assured during the policy term
3 Fund Value is the total value of your money that is invested in equity and debt fund of your choice.
4 Sum Assured is the fixed minimum amount your family receives in your absence.
^ Starting from the 6th policy year, a part of the funds can be withdrawn. This can be done at any time, provided monies are not in DP Fund. You can make unlimited number of partial withdrawals as long as the total amount of partial withdrawals in a year does not exceed 20% of the Fund Value in a policy year. DP Funds refer to Discontinued Policy Funds and consist of money from lapsed policy.
** Tax benefits under the policy are subject to conditions under Sections 80C, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and cesses, if any, will be charged extra, as per applicable rates. Tax laws are subject to amendments from time to time. Please consult your tax advisor for details before acting on the above.
ICICI Pru Smart Life (unit-linked non-participating individual life insurance plan) - UIN: 105L145V08