Best monthly saving schemes for child's education

 

In this policy, the investment risks in the investment portfolio is borne by the policyholder  

Gone are the days when academic fees were affordable and fit easily into the regular household expenditure budget. Education costs have been rising for quite some time now and increasing at a rate of 12% per year on average. To help manage this peaking expenditure, children's plans can be a useful tool in building up a corpus. For that, all you need is a monthly saving scheme. 

Why monthly saving can be a good option?

Prepping up for your child’s educational needs at the right time is an essential practice. And to do that, you don’t need to burden yourself. With the right strategy in place, saving an affordable amount every month in children's plans can help you create the desired fund for your child’s education. A monthly savings scheme allows you to pay a small amount every month, which grows at a compound interest rate and provides you with a lump sum maturity benefit at the end of the policy term. You can use this corpus to ensure a smooth academic experience for your child. 

Child insurance as a monthly saving scheme and investment option

A monthly saving schedule to create a fund for your child’s education can be attained through various investment options. You can save through Systematic Investment plans,  ULIP Investments for your childs future, Recurring deposits, Public Provident Fund (PPF) or debt funds to get the desired outcome. However, among these options, the most popular is the children's plan or the child ULIP. Child insurance plan is a combination of an insurance and investment plan aimed to fund your child’s educational needs. Here the premiums paid form the life cover while the policyholder gets to invest a part of that money in market-linked funds to fetch bigger returns. In a monthly saving schedule, the premium payable is relatively less and thus affordable, making it a convenient choice of investment. Moreover, the policyholder parent also earns tax benefits, making him/her gain while securing the child’s future. 

How a child insurance be helpful?

Children's plans are designed to pay a lump sum upon maturity, which creates the desired fund to fulfil the child’s academic goals. Meanwhile, if the policyholder has an unfortunate demise within the policy term, the sum assured is paid as a death benefit. To ensure better coverage, optional riders like accidental death or disability and critical or terminal illness coverage can be added to the policy.  

Some plans offer a waiver of the remaining premiums in the event of the policyholder’s death, where the policy continues to operate till the end of the term and the maturity benefit is paid in due course. Some plans also come with a partial withdrawal facility to help cope with sudden financial crunch or a regular payout option to support the child’s academic milestones. Thus, with the right choice of child insurance plan, creating a corpus for your kid’s academic future is no longer a daunting task. 

Benefits of children’s plans

As a child insurance policyholder with a monthly premium schedule, there are two major types of benefits you enjoy. 

• Paying a meagre amount every month ensures your pocket does not feel the pinch. 
• The policyholder gets tax exemptions for annual premium payments up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961¹. The death benefit is completely tax-free while the maturity benefits are entitled to tax deductions under section 10 (10D)¹. Additional riders of coverage towards critical or terminal diseases are also tax-deductible subject to section 80D. 

End notes

They say it’s always profitable to start early on investments. Children's plans are no different. Thanks to inflation rates, and the way the cost of education is escalating, building a decent corpus for the future is getting tougher every day. Starting early on a monthly scheme will give you an edge as the low premiums make a much bigger coverage amount affordable without burdening you. Isn’t that a wise deal?

Related Articles

• How to choose the Best Child Education Plan?
• When Is the Right Time to Purchase a Savings Plan for My Child?
  
• A Comprehensive Guide to Planning for Your Child's Education
  
• The Ideal Child Education Plan and Insurance
  
• Child's Education - Tips to Choose the Right Child Plan
  
• 4 ways to future proof your child's higher education and your family's financial well being
  

Reference links:

https://www.canarahsbclife.com/blog/child-plan/best-monthly-saving-schemes-for-childs-education

https://groww.in/blog/investing-for-children

ARN - ED/12/23/6641