As we celebrate Children’s Day in November, there’s no better time to reflect on the importance of securing your child’s financial future. Every parent dreams of providing their children with the best opportunities for education, career growth, and a secure life. Investing in a financial plan early can help achieve these goals by building a stable foundation for your child’s future needs.
Read moreNothing Is More Important Than Securing Your Child's Future
Invest ₹10k/month your child will get ₹1 Cr# Tax-Free* on Maturity
Child plans are financial instruments designed to help parents save for their children's future education or other major life events, such as marriage or a down payment on a home. They combine life insurance coverage for the parent with a savings component that accumulates over time. This dual benefit provides financial security for the child in case of the parent's untimely demise, as well as a lump sum amount at maturity to help fund their future goals.
Investing early in a child plan is one of the best steps you can take to secure your child’s financial future. Starting early allows for a longer investment horizon, which can significantly boost the growth of your savings due to the power of compounding. Here’s why beginning early with a child plan is essential:
The earlier you start, the longer your money has to grow through compounding. Compounding allows your returns to generate additional returns, helping you accumulate a substantial fund by the time your child needs it for education, extracurriculars, or other milestones.
Starting early often means lower premiums, as insurance costs tend to increase with age. You can lock in lower rates and choose plans that align with your risk tolerance and long-term goals. Early investments in child plans also allow you to choose funds with higher growth potential.
Child plans often include protective features such as waiver of premium, ensuring that the child’s education or future goals remain secure even if the primary earning member faces unforeseen circumstances. Early investment in such a plan provides peace of mind and long-term financial stability.
Most child plans offer tax advantages, allowing you to save on taxes under prevailing laws. Starting early means enjoying these benefits for a longer period, further enhancing the value of your investments.
When you begin early, you have the flexibility to adjust the plan as your child grows, ensuring that the plan aligns with their evolving aspirations. Early planning enables you to make choices with greater confidence, ensuring adequate funds are available when they need it most.
Here are some popular investment options to consider for your child:
Mutual funds are a flexible and accessible way to invest for your child’s future. SIPs allow you to invest small amounts regularly, which can grow significantly over time. Equity-based mutual funds are ideal for long-term growth, while debt funds offer stability with lower risk.
ULIPs combine investment and insurance, allowing parents to invest in a mix of equity and debt options based on their goals. ULIPs offer tax benefits and flexibility, as they allow fund switches based on changing risk tolerance and market conditions. The insurance cover in ULIPs adds an additional layer of security.
PPF is a government-backed, tax-free investment option that ensures safety and decent returns. With a lock-in period of 15 years, it aligns well with long-term goals such as funding education or other major expenses. The tax benefits associated with PPF add to its appeal as a secure option for child-focused investing.
Designed for the financial security of a girl child, Sukanya Samriddhi Yojana offers high-interest rates and tax-free returns. This government-backed scheme provides a disciplined approach to savings, with the added advantage of a longer investment period. It’s an excellent choice for parents looking to support their daughter’s education or future needs.
Bank and corporate fixed deposits are low-risk investment options offering guaranteed returns. While FDs might not provide high returns like equity-based investments, they provide stability and liquidity, making them suitable for short-term needs or as a balance in a diversified portfolio.
NSC is a low-risk, fixed-income investment that can be purchased at post offices. With a tenure of five years and tax benefits, NSC provides a safe and predictable return, making it a reliable addition to your child’s investment portfolio for short-term goals.
Gold remains a traditional yet effective way to save for future expenses. Investing in digital gold or gold ETFs is a modern approach that avoids the challenges of physical gold while offering similar growth potential, especially for long-term horizons.
Clear Goals: A financial plan helps you define your short-term and long-term financial goals, such as buying a house, saving for retirement, or funding your child's education.
Prioritization: It allows you to prioritize your goals based on their importance and urgency.
Risk Management: A well-structured plan helps you identify and mitigate financial risks, such as job loss, illness, or economic downturns.
Emergency Fund: It encourages you to build an emergency fund to cover unexpected expenses.
Investment Strategy: A financial plan outlines an investment strategy tailored to your risk tolerance and financial goals.
Regular Savings: It promotes regular savings and disciplined investing.
Financial Peace of Mind: Knowing that you have a plan in place can alleviate financial stress and anxiety.
Confidence: A well-structured plan can boost your confidence in your financial decisions.
Informed Choices: A financial plan provides the information and tools you need to make informed financial decisions.
Avoiding Impulsive Spending: It helps you avoid impulsive spending and stick to your budget.
Flexibility: A good financial plan is flexible and can be adjusted to accommodate changes in your life, such as job changes, marriage, or the birth of a child.
Regular Review: Regular reviews ensure that your plan stays aligned with your evolving goals.
This Children’s Day, take the first step toward building a secure financial future for your child. An investment in their future today promises them a world of opportunities tomorrow, helping you fulfill the dream of seeing them grow and succeed. Start planning now, and make every Children’s Day a celebration of their bright and secure future.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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