Along with the overwhelming happiness, being a parent also comes with great responsibility.
Everyone wants to provide their children with the best in life.
Towards that end, such dreams need money. It requires well-thought-on financial planning to analyze the expenses involved at every step of bringing up a child.
Good education plays a critical role in the development of child and, undoubtedly, should be a part of your plans of securing your child’s future. (Even the (in)famous average rate of inflation in India has been outrun by the increase in cost of education,)
And now, about how much to invest in your child’s future. And which financial tools to invest in.
And that brings us to…
Child Insurance Plans
These are plans of various types that go in to secure a child’s financial security and in to making sure that financial worries do not hamper her education. These long-term savings/investment plans are an amalgamation of both insurance and investment.
It sounds ugly, but there might arise a situation in which you pass away and your child becomes dependant on your financial foresight.
Though child insurance plans are varied in nature, what they all have in common is that in case of your unfortunate demise, your ward shall be paid a lump sum payment (death benefit), and the insurer continues to deposit money on your behalf in your ward’s account under the ”waiver of premium benefit”.
These Child Plans are of The Following Two Types:
Traditional Child Plan
These are “safer” and more secure, with guaranteed maturity returns. This is the plan for you if you wish to invest in low-risk funds, such as, government securities and corporate.
Unit-Linked Plans (ULIPs)
ULIPs are for you if you do not mind a bit of risk and gambling. These plans yield higher returns, but make a note that ULIPs are beneficial in the long run only. Any money you invest in a ULIP goes into the debt and equity market and therefore these are high-risk, high-returns financial instruments.
As is implicit, you need someone to act as your child’s “guardian” in these plans. Goes without saying, choose the guardian wisely and with care. It is your child’s future at stake here.
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