Children Investment Plans
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.
Best Child Investment Plans 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 Deposits
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.
Gold
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.
Mutual Funds
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.
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.
Important Milestones
As a parent, you want to provide the best for your child. You also want to ensure that your child’s dreams are financially secured. The right investment plan help you secure your child's financial future and ensure that you have enough money saved for the important milestones of your child’s future.
Investing in child investment plans help you save up for these important milestones. Investment plans for children help you invest as per your convenience, so you can meet your child’s future goals, without losing out on your other long-term financial goals.
When is the Right Time to Invest in Child Investment Plans
The ideal time to invest in child investment plans is as early as possible. Starting early gives your investments more time to grow, allowing you to benefit from the power of compounding. By investing consistently from your child’s early years, you can build a robust financial foundation to secure their future dreams.
Why should you invest early in Child Investment Plans?
Compounding Benefits of Investing Early
Starting child investment plans early allows your money to grow through compounding. This growth happens as your returns start earning returns themselves. Early investments reduce financial strain later, ensuring a secure fund for education, marriage, or other milestones. The sooner you start, the greater the benefits.
Adjusting as the child grows
As your child matures, their needs and aspirations will naturally change. In the early years, a child investment plan focuses on long-term growth, while later, it may shift towards funding education or pursuing specific career goals. As your child nears university age, you might need to adjust your investments to accommodate tuition fees, living expenses or other related costs. These adjustments ensure that your plan remains relevant and effective, adapting to your child’s evolving life stages and goals.
Education-specific investments
When your child turns 18, their career aspirations and choice of education become clearer, allowing you to adjust your child investment plan. Whether they are pursuing a degree in engineering, medicine, law, or the arts, each career path comes with unique financial needs. Engineering or law may involve different financial goals. Planning for these specific educational expenses in time can help ease the financial burden when the time comes.
Late-Stage investments
As your child grows older, late-stage investments in their future become essential, particularly for significant milestones like higher education or marriage. By starting early with child investment plans, you can build a financial cushion for these life-changing events, ensuring your child's dreams are realised without unnecessary stress.
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Benefits of Child Investment Plans
Below are some benefits of investing in child investment plans:
Benefit of investment and protection
Some child investment plans 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.
Tax** benefits
Some Child investment plans 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.
Partial withdrawals
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.
Emergency funds
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.
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Conclusion
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.
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