In today’s competitive world, all parents are in a rush to provide a top-notch education to their children, for which a huge amount of funds is required. Child educational plans are investment tools that are developed for parents to save & invest funds for their children’s future education. These plans offer a dual benefit of savings & protection, with guaranteed returns. The corpus accumulated can be used for a child’s education, marriage, or any other additional requirements, even in the absence of a parent.
This includes book costs, tuition fees, & other educational expenses. In this article, we will explore some of the best ways to save money for a child’s education, thereby alleviating financial constraints for parents.
Types of Child Educational Plans
Provided are the different types of child educational plans:
- ULIP Child Education Plans
ULIP includes both investment & insurance factors, providing policyholders with dual benefits, i.e., securing their family’s financial future with financial growth. Under ULIP, a part of the premium is allocated towards life insurance & the rest towards investment. One can opt to invest in debt, equity, or both, depending upon the risk acceptance level & your financial objectives, making it an ideal investment option. It provides the flexibility to switch between the funds anytime during the policy tenure.
Every parent wants to provide the best education to their children, for which a huge corpus of funds is required. When it comes to securing your child’s future, a ULIP-based child plan is considered to be a great option, as it helps secure your child’s financial future. ULIP-based child plans help in meeting future financial obligations, such as a child’s higher education, a child’s marriage, etc. If you are looking for the Best Child Education Plan, you can opt for a ULIP, as it offers the dual benefits of insurance & investment.
- Money Back Child Plans
A Money Back Policy is a type of life insurance that offers the dual benefit of both investment & protection. It allows you to receive returns at a regular interval of time during the policy tenure, hence providing a life coverage offering financial protection in the case of an unfortunate incident. This plan can also be availed for children, which will help parents to secure the financial future of their child.
Under this plan, a certain amount or percentage of the sum assured is paid back to the policyholder at a regular interval. If the policyholder survives throughout the policy tenure, they will get the remaining amount of the sum assured &, if the policyholder dies during the policy tenure, the full amount of the sum assured is paid back to the nominee, irrespective of the fact that the survival benefits have already been paid.
- Endowment-Based Child Plans
An endowment plan is a kind of life insurance plan which includes a lump sum payment either on the policyholder’s death or maturity of the plan. This plan best suits futuristic investors looking for long-term investment options, who want to plan for some future events, such as their retirement, their child’s marriage, etc. It is a combination of both life insurance coverage & long-term savings that offer assured returns. Under this plan, a policyholder is required to save a certain amount on a regular basis for a specified duration. If he dies, his beneficiaries will receive the entire sum assured, & if he survives, he himself will receive the survival benefits.
An Endowment Plan for a child is sometimes considered the Best Child Investment Plan for parents who are looking for a secure educational future for their children & who want to provide them with assured savings & insurance coverage. This plan enables parents to save funds to cover future expenses, such as their child’s education, marriage, or other expenses. According to this plan, the maturity benefit will be paid to the child on the occurrence of certain events & death benefits in case of the demise of the policyholder.
How to Choose the Right Education Plan for Your Child
Provided are the steps to be followed to choose an appropriate education plan for your child:
- Assessment of Financial Objectives
Assess the financial objectives in terms of the amount that would be needed to fulfil the future cost of your child’s education. While determining this amount, you should also assess the inflation factor, investment horizon, etc.
- Evaluation of Risk Tolerance Level
Evaluate the acceptable level of risk, i.e. if an investor can accept a low level of risk, consider traditional plans, such as PPF or SSY. If you are willing to accept a high level of risk, you can consider ULIPs or mutual funds, etc.
- Using a Child Insurance Plan Calculator
Investors can also use a child insurance plan calculator to calculate the amount of premium that would have to be paid to achieve their financial objectives. This calculator is available online, considered to be a quite helpful resource in investment planning.
- Diversification of Investments
An investor should manage risks associated with the help of diversification of funds, where the risk is spread between multiple sectors & classification of assets, hence reducing the risk associated with a single plan.
- Reviewing & making Amendments regularly
Review the investments made regularly & make adjustments accordingly, depending on the financial objectives & market situations.
Conclusion
Rising education costs should not be a reason for your children to drop their dreams. Investing in a child’s education plan is the proactive step which will help achieve financial security for the child. As there are many options available, investors should evaluate them depending on their financial objectives & risk acceptance level. Choosing these plans ensures that you are well prepared for the future rising costs of education & fulfilling your child’s dreams. The right plan might not suit every policyholder, thus it is advised to conduct proper research, consult financial advisors, & then choose an appropriate plan that best suits your financial objectives & risk tolerance level.