Parenting brings immense pleasure and joy to us. Along with
this it brings a sense of responsibility, which can sometimes seem scary. The
best way to avoid such scares is to plan for things which are predictable and
then deal with situations for which we are not prepared.
One situation that we can always prepare ourselves for is the
financial need of the children. Broadly speaking, the needs can be classified
as medical, educational and marriage. Once we prioritise the needs we must
allocate the required funds to meet these needs.
These can be met either by way
of investing in mutual funds or bank deposits in your name and making the child
the nominee or directly investing in the child’s name which will yield you such
sums that you need at the particular time.
While investing in children plans you must keep in mind two
important factors:
1. Inflation – You require the funds at a later date and
therefore must keep in mind the inflation at the time you require the money.
2. The exact time when you need the returns.
Having calculated these, you must analyse the plans that best
suit your needs. There are a few plans, features of which are discussed below.
You must analyse various plans and understand how they work before investing in
the plan. The child investment plans help you to build a corpus that may come
in handy for your children’s needs.
Different plans have different characteristics. You have to
analyse the features in detail and choose the policy with care. Some features
that could be considered for
comparison are listed below:
Self-funding of premiums:
Some of the insurance companies pay the premium from their
own funds in case the policy provider dies. This ensures that the maturity
amount reaches the child as intended.
Flexibility of the plan:
Some plans allow for partial withdrawals; these plans help in
case of urgent needs without disturbing the other planned expenses and income.
This flexibility to switch investments from one fund to another allows you to
capitalise on the market conditions. It also protects you from the volatilities
of the market.
Child
insurance plans are available in two flavours: traditional and unit-linked
(ULIPs). While they are very different in their working and features, both help
in creating the much need financial security. Unit linked plans (ULIPs) are
market linked and therefore come with an inherent risk. The traditional plans
suit the needs of those who are risk-averse.
Children plans have an added advantage over other plans as
they give the payouts to children even if the policyholder is not around. Most
of these plans are structured to give timely amounts for education needs,
marriage needs and sometimes even for the business ventures as seed capital.
Many of the top insurance and banking companies offer child
plans. Here is a comparison between them. Readers are wisely advised to check
the policy details and invest in the one that suits their needs.
In the ULIP category the following child plans are available:
Assessing your needs and future requirements, form an
essential part of buying a child plan. After careful consideration you may
choose to invest in any of the child plans that are available in the market. If
you have risk taking abilities then ULIP plans may work best for you. If you
have a conservative mind set then the tradition plans suit you best.
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