As a parent, your children mean the world to you. Right from the day your child is born, you wish him/her to do better than you in every possible way. Being a parent is a joyful task, but it comes with many challenges. One such challenge is to provide quality education to your children.
Getting an education is among the most significant milestones in a child’s life. Every child has big dreams for their future. Someone aims to be a doctor, whereas others aspire to be engineers or astronauts when they grow up.
However, parents are often unaware of the rising cost of education that can take a toll on a child’s ambitions. Hence, to meet such substantial educational expenses conveniently and make their dream a reality, it is essential to start planning for it at an early age.
But, how should you plan your investments to cater to your child’s future needs and better life? This is where the child education plan plays a vital role.
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What is a ‘child education’ plan?
A child education plan is a combination of saving and investment that helps shape your child’s future by covering his/her education costs. It ensures that your child’s financial needs are taken care of even in your absence.
A lump sum amount is paid at the end of the policy term or in the event of the untimely death of the insured parent. In most cases, this insured amount is at least ten times the amount of the premium paid.
All in all, it is a sure way of giving vital financial support to your child by securing his/her today and tomorrow.
Why buy a child education plan?
What if something happens to you? Who will provide for your child’s school and college fees?
Saving for your child’s education is a cause of worry for most parents. Therefore, the only way to prepare for your child’s financial future is to buy an education plan from a reputable insurance company. Such policies are designed to guarantee your child a better future and help build financial corpus overtime for his/her future needs.
Below are some more benefits of buying a child’s education plan.
- High education cost
With the rising levels of inflation, the cost of higher education is increasing at nearly 10% every year. This means that it will be four times of what it is today in the next 15 years.
Hence, your good old habit of saving every month may not suffice the growing higher education costs.
- Partial withdrawal facilities
These plans provide partial withdrawal facilities to meet the unplanned expenses during your child’s education such as, the cost of special coaching classes, medical expenses, etc.
- Use as collateral
If you plan to avail an education loan for your child’s education, then it can also serve as collateral.
- Tax benefit
You can also avail tax benefits under the child education plan under section 10 (10D). Further, the premium paid for this plan is eligible for tax deduction under section 80C of the Income-tax Act, 1961.
What is the right time to buy a child education plan?
Simple. As early as possible.
The greatest gift you can give to your child is good quality education and a secure future. For this, you need to be financially prepared and plan for all the necessary expenses from an early age. The earlier you begin, the more you can save. For example, if your child is 1-2 years old, you have a good 15-16 years to save.
The majority of education plans offer maturity benefits as soon as the child turns 18. Thus, starting early not only helps to build a higher corpus but also puts a lesser burden on your finances because it requires you to invest smaller amounts every month. Plus, it increases your ability to take risks, which reaps higher benefits.
Types of plans
With an objective to fulfill the parent’s dream of providing the best facilities for their children, numerous insurance companies have come up with child education plans specifically designed to address your child’s future needs. Some of these are:
- SBI life – Smart Scholar
- SBI life – Smart champ insurance plan
- LIC – Child career plan
- LIC – New children’s money back plan
- ICICI – PruSmartKid’s Regular Premium
- HDFC SL Youngstar Super Premium
Tips for choosing the best child education plan
Due to a large number of child education plans available in the market, choosing the most suitable one according to your child’s needs can be a daunting task. The following tips can help you achieve this objective.
- Understand the policy features
Every insurance company offers a different education plan containing its own set of unique features. Hence, to select the most ideal option, you need to read the policy documents thoroughly and understand the conditions and clauses in detail.
- Right amount of cover
The right amount of coverage for your children can take care of their needs in your absence. Several economic factors, such as inflation rates and rising education costs, can help you decide how much you need to save for your child.
- Premium waiver benefit
Do look for a premium waiver benefit offered by the insurance company. Under this benefit, if the insured parent dies during the policy tenure, all the future premium payments will be borne by the insurance company. This way, the policy will not get lapsed, and the child will receive the assured sum on maturity.
- Risk appetite
If you wish to take high risks, you can opt for Unit linked insurance-based plans. In case you have a lower appetite for market uncertainties, simple endowment plans can be a good alternative.
Summing Up
As the upbringing of a child is the primary priority of every parent, they must do systematic planning to secure their children’s future. Child education plans allow you to save over the long term in a disciplined manner.
The earlier you start saving, the better.