Step-By-Step Approach to Plan Your Child's Education Needs

The cost of education has been peaking and is unlikely to stop soon. If you wish to secure your child’s future and ensure that he/she gets the quality of education necessary to compete in these times, you need to start planning. Fortunately, LIC has introduced insurance schemes for children that attempt to specifically offset this risk.

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The following sections describe a step-by-step approach to effectively plan your child’s education needs and further illustrate how you can do so with LIC. 

Step-By-Step Approach to Plan Your Child's Education Needs

To build an education fund for your children, you must start early and diversify your investment portfolio. This will allow time for the corpus to grow and with the power of compounding, you can expect good returns to give wings to your child's ambitions.   

The guide below should make building your child’s education corpus easier. 

  1. Estimate Your Income and Current / Future Assets

    With rising costs and inflation in nearly every sector, it is important to create additional sources of income. Especially, if you are the sole earning member of your family with multiple dependents, you need to figure out how much you can contribute to your child’s education funds without compromising on standard living. 

    Compare high-return investment options and create additional avenues for cash flow. Further, you need to create separate funds for primary needs such as housing, education, retirement, etc. to ensure that one does not overlap with the other. 

  2. Decide the Corpus Amount

    As a first step, take into account the rate of inflation. Then, identify the stage your child's at and their respective needs. Ask yourself whether you plan to have another kid because then the savings have to be larger. 

    If your child is below 4-5 years of age, you have the potential to accumulate enough funds if you invest in a child plan right now. However, at this stage, it would be difficult for you to know the field your child might want to pursue and to determine the costs associated. You could then compare the kind of costs required for some of the more expensive courses, so you don’t run short on funds. In this way, even if your child decides to pursue a niche field, you will have sufficient funds to pay for it. 

    When your child reaches an age where he/she starts picking up hobbies and interests, you will have a better idea of the amount of corpus. If you feel that your estimated amount might fall short, it is time for you to diversify your investment options for increased returns. 

    Finally, when it’s time for them to move to higher levels of education, you can exploit the multiplier effect of compounding and facilitate whichever direction they wish to pursue.   

  3. Prepare a Plan of Action in Your Absence

    Make sure to have a plan in action in the event of your unfortunate demise, especially if you are the primary earning member of your family. Further, allocate separate funds for each child and make sure to invest in insurance plans to look after other obligations in your absence. 

    ULIPs guarantee additional savings and returns on investments which make them a good choice. LIC’s SIIP and New Endowment Plus plans offer an opportunity to invest in 4 different fund options, in addition to enjoying guaranteed additions to the fund value. 

    Further, life insurance policies that offer periodic income on your death should be a priority. With LIC’s Jeevan Shiromani, you have the option to assure a sum of Rs.1 Crore, which the company is liable to pay to your family in the event of your death.

  4. Choose a Child Plan With Additional Returns

    Once you have the estimations and have decided on the kind of investments you are going to make, it’s time to pick a suitable child insurance plan. The plan should be in sync with the future needs of your children. 

    The Life Insurance Corporation of India (LIC) has introduced some interesting child plans that offer several benefits to cover the important needs of your kids. These are - LIC's Jeevan Tarun and LIC's New Children's Money Back Plan. The plans are designed keeping in mind the needs of a child at various stages and serve out periodic payments to fulfill them. 

    Let’s take a quick look at both these plans for better understanding. 

Overview of LIC Child Plans 

LIC's Jeevan Tarun - It is a participating, non-linked policy that offers benefits of savings and protection for your child. Key features of this plan are -

  • With this plan, growing children can meet their educational needs through survival benefits paid annually from the ages of 20 to 24 years. 

  • In addition, the child receives maturity benefits at the age of 25. 

  • The plan also comes with a simple reversionary bonus and other applicable final additional bonuses, which makes it a great option for your child. 

  • The Jeevan Tarun plan further offers rebates on sums assured higher than Rs.2 Lakhs.  

LIC’s Children’s Money Back Plan -  It is an individual participation life insurance plan. It is a type of money-back plan designed to cover your child's education and marriage, among other needs. Some of its key features are -

  • 20% of the sum assured is paid to the child on turning 18, 20, and 22 years. 

  • 40% of the sum assured is paid by the insurer if the policyholder survives the maturity date of the policy. 

  •  The policyholder is entitled to receive bonuses subject to participating profits made by LIC. 

  • There is no maximum limit to the sum assured under the policy. 

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

In Conclusion

An MBA in India today costs a minimum of Rs.20 Lakhs. Further, pursuing an engineering degree from IITs can cost you around Rs.10 Lakhs. Similarly, prices of nearly every sought-after course have touched limits that are difficult for an average person to reach. With inflation in every domain now, you need a financial net for your children urgently to at least combat their educational costs. Remember that it's never too late to start investing and if you have come here, do not stop until you purchase a policy to serve your child's education!

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:-
++Returns are 10 years returns of Nifty 100 Index benchmark

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