Child Plan or Education Insurance plan – Do I really need it?

Of late you will see and hear ads of a lot of companies (life insurance companies, mutual funds, sometimes even banks and NBFCs, financial advisory companies, etc.) yelling on top of their voice about planning a fund for your child.  The cause they are promoting is definitely good.  But remember that all such plans are not the same.  Specifically, an education insurance plan is very different from all others.

You may need a combination of multiple plans to have a solid foundation for your child.  I am covering that separately. This write-up is more to do with Education Insurance plan, or Child Plan as it is commonly called which are sold by life insurance companies.  Know this product well and how it can fit well into your child education funding goals, before you decide to buy it.

First, understand this!  Don’t get fooled!

Let me first resolve a basic confusion that some life insurance agents have been taking advantage of.

An insurance plan taken on the life of a child (where the beneficiaryon death of the child is the parent) is NOT a child plan.  Some agents sell this to (even well-educated) customers as a child education plan, but such a plan is very far from it.  Such a plan is just an investment plan.  Where is the question of buying insurance with your child as insured?  And what is the need for an education plan if something happens to the child?  Please understand this first.

That is where an education insurance plan (or child plan) comes in.  It ensures that even if you were to die, regular amounts of money is passed on to your family to support your child’s dreams and aspirations.  It also provides for marriage costs, and other expenses.

A real child plan (or education insurance plan) is an insurance plan that ensures that the child is financially protected if the parent dies. Remember that this is an Insurance plan and therefore different from all others which only help you to build a fund for your child over time.  The insurance plan does both fund creation as well as protection.

Child plans are regular premium plans, wherein premium is paid for limited period or throughout the term of the policy.

How are Child plans different from other investments you do for your child?

Cost of Child Education Plans is growing much higher than inflation rate of 5-6%.  In fact, think about it yourself.   School and College fees today would be at least 15-20 times higher for you, the parent, than what it is today.

Source: http://childplan.tumblr.com/post/145202520318/child-plan-or-education-insurance-plan-do-i

How will a Child Plan help in Combatting Increasing Education Cost

It’s safe to say that a child’s education has emerged as a primary cause of concern for parents. This is evidenced by the fact that the escalating costs of education are eating up a major share of the average Indian household budget. In fact, surveys reveal that about 65% of parents land up spending half of their monthly salary on school fee, extra-curricular activities, educational trips, electronic gadgets, and other expenditures related to the school curriculum. By the time their teenage child graduates from high school, parents would have already spent more than 18-20 lacs on an average. Of course, higher education is a different story altogether. To understand the situation better, let’s have a look at some of these startling figures:

Presently, a four-year engineering course costs approximately 6 lacs. In 10 years, the cost is likely to touch 15.6 lacs. By 2033, it would cost a whopping 33 lacs to get an engineering degree!

MBA course that roughly costs about 16 lacs today shall jump to 41.5 lacs in 10 years from now. By 2033, the cost would have reached a staggering 88.9 lacs approx considering inflation!

In the department of medicine, the expense of completing a course shall hike from the present 12 lacs to 66.7 lacs in a matter of some years down the lane

Overall, the cost of higher education will continue to rise at 10-12% year on year.

While the cost of sending a child to school has seen a sharp surge of about 160% in 8 years, the average annual income of parents has risen a paltry 30% during the same period. Owing to the increased competition and lifestyle inflation, children have not been displaying much eagerness in attending government colleges having minimal facilities. The influx is towards costly private-run institutions. Further, the wish to pursue an overseas education adds a new dimension to the situation. The expense of completing a course in a foreign land would cost about 3-4 times more as compared to that in India! The total expenditure would primarily depend upon the duration of the course, stay, traveling, and the choice of university & country.

Considering this scenario, it is imperative for guardians to plan for such massive cash outflows of raising a child

Investing in a Child Plan turns out to be the ideal solution!

Let us now delve on how a child plan helps to deal with this situation of the mounting costs of education:

Builds a Corpus for Meeting Education Expenses

The primary benefit of buying a child plan is that even with minimum premium payment, one can build a corpus of as much as 10 times the amount invested in the plan. This lump sum amount comes handy once the child is ready to take up higher education. For instance, a parent who wants his/her child to attain an MBA degree, then, according to the statistics mentioned above, there would be a requirement of almost some enormous lacs of money, if the child were to pursue the course in 2033. Now, starting investing early on child plans helps to build a corpus of such an amount at the end of the policy term to fund the course fee.

Facilitates Compounding Given that the rate of inflation in education is skyrocketing, it becomes imperative for parents to invest in a tool, which offers them the benefits of compounding. In this context, a child plan is the perfect example, which works on this principle of growing wealth. If started early, the money stays invested for a long period of time, and the policy gradually starts gaining from the power of compounding. This helps in generating a huge amount of money at the time of policy maturity, which can be utilized to support the child’s education needs.

Offers a High Level of Equity Returns for Combatting the Rising Costs

A child plan gives guardians the opportunity to invest in equity instruments under unit linked child plans. Those having a risk appetite can opt for investing in equity funds or balanced funds, and enjoy the perks of high and medium returns on their investment. The key is to start early and stay invested over a long term horizon, so that the volatility in returns flattens out.

Dynamic Fund Allocation Safeguards the Capital

Child plans allow policy holders to opt for their preferred funds based on their risk taking capacity and investment appetite. Further, they also offer the options of Systematic Transfer Plan and Dynamic Fund Allocation, which safeguards the essential capital against market instability. By parking the money in equities during the initial years, these plans enable policy holders to tap the maximum profits. Then, during later years, the funds are switched to more secure debt instruments, thereby stabilizing the profits already earned. These features ensure that the capital does not erode and can be used when needed the most to meet the child’s education expenses.

Can be used as Collateral for taking loan

In situations, wherein parents need additional funds for financing overseas education, a child plan may be used as collateral to secure a loan.

Annual payouts for school fee

Child education plans also offer periodic annual payouts for meeting the school fee of the child. This is particularly useful in the absence of the parents. Most child plans provide 10% of the sum assured via annual payouts, so that the child can continue going to school, even if the parents are not around.

It is important to note here, that a child plan can help in combating the rising education costs, only if the policy holder embraces the idea at an early stage. One should always remember that each additional year of investment translates into a bigger corpus, thus providing better financial assistance in meeting the costs of providing a good education to the child.

Source: http://mihir2014.tumblr.com/post/145146618031/how-will-a-child-plan-help-in-combatting

Be Prepared For Various Stages of Life

Humans tend to go through various stages of life. Childhood and old age are two stages of life which need maximum financial stability. Imparting best education, quality lifestyle and good ethical values is something that every parent tries to provide their children. Financial stability can in modern times prove to be the biggest hurdle to conquer. Education sector, health sector, commodity sector, every market is inflating at a exploding rate and has adverse effects upon finances of modern households.

Thus providing quality education and better lifestyle to family can be a hard task. Apart from this the truth of death can also leave your loved ones stranded amidst worry and trouble. Well, the right thing to do when you are alive is to plan for the future. To Invest, and invest in the best insurance plan. A normal professional spends most of his life earning bread and butter for his loved ones. Basking in the sun, toiling to goals is all that captivates the mind. Spending almost whole life in doing so, a vital question is often undermined. WHAT NEXT? Old age is inevitable and such age poses a lot of challenges and questions ahead. Living a whole life with financial independence, a sudden dependence can prove to be heartbreaking.

Cbanner-commercial-child-carehild insurance plans are devised to provide best possible financial assistance to the child at various growth stages of his life. Starting from basic primary level education to higher education, abroad education, marriage and so on. In common words, it’s just an investment which ensures a secured hassle free future for your child. The money paid as premiums are in its own way an investment which can be retained at specific stages of life. Various child insurance plans can be compared and opted for. In case of death or any injury, these insurance plans ensure smooth movement of the child`s future with no financial barrier. Depending upon the insurance plan and its terms stated, a person can avail returns at the maturity level of the plan. The age bars of the person and the Child Plans is also considered by the insurance providers in order to determine the maturity age of the insurance plan. Usually the returns are provided at stages where the child will need them the most, such as college education, marriage, higher education and so on.

Source: http://childplan.tumblr.com/post/144799473578/be-prepared-for-various-stages-of-life

Child Plans

Financial Planning for A Special Child Should be Long Term

World Autism Day was observed on 2 April, as an occasion to raise awareness about children with autism. While an estimated 12 million children in India live with disabilities, we are grossly uninformed about the financial implications of raising a child with special needs. Parents of children with disabilities are often faced with the concerns of managing expenses for therapy, schooling and care, as well as ensuring financial security for their child's future. Here are a few key points to consider when planning finances for a child with special needs: Save more

Disabilities can hinder a person's ability to work or earn a living. It is therefore important for parents to ensure that the corpus they accumulate lasts for their child's lifetime. While ordinarily, parents would aim to save enough to care for a child for the first 20 years or so or their life, in the case of a disabled child, this support must be extended to 50-60 years or more.

Have a separate contingency fund to take care for six months of regular expenses for the child in uncertain circumstances. "While deriving the corpus amount for the contingency fund, you need to take into consideration the physical and medical condition of the child which may deteriorate over time

Appoint a guardian

Choose an individual you trust to become responsible for taking care of your Child Plans after you, and provide them with assistance even in adulthood, and designate them to be your child's legal guardian in the event of your passing. Seek legal assistance to draw up a will specifying how your assets will be distributed after your passing, and whether they should be handled by your child or their guardian.

Also See: How to plan financially for a special child

If the expenses for the disabled dependent are less than maximum tax deduction amount, an ad hoc deduction of Rs 75,000 is made." Further, unlike investments made in the name of minors, income from investments made in the name of a child

Source: http://childplan.tumblr.com/post/144693246858/financial-planning-for-a-special-child-should-be

Promise A Secure Future to Your Child

Generations pass on culture, traditions, inheritance to the generation which comes after them. This purely is the real nature of human existence. Humans tend to create their unique identity which makes them quite different and identical at the same time. Children are considered to be the backbone of any civilization as they carry forward the name, traditions and history of the human race forward. In modern times the most important priority for every parent is to provide the best education to their children. This can be a real challenge for most of the parents as the current inflation in the education sector is constantly on the rise and with every passing day, the inflation graph is going up. In order you are wondering, how to keep a check on the same? How to provide best education to your children?

Here is your answer. Invest in Child insurance plans. A Child insurance policy provides promised benefits towards your children education. Child insurance plans not only make sure that your child gets financial assistance in order to pursue higher education but also provides benefits at various stages of his/her life such as marriage and so on. Insurance is just like any other investment with far more coverage and benefits than any other institution of financial savings.

Insured party promises to pay a fixed sum of money towards the insurer at fixed intervals of time. These payments are known as premiums. Premiums are convenient installments which an insured party pays in order to avail benefits of the policy on maturity of the policy. The advantage of Child Plans is also that incase of any fatality occurring to the insured, the beneficiary would be provided with the benefits. This means your child would be secured for a better and prosperous future. Child insurance is also provided with rebate under the income tax law of the country.

In order to avail child insurance, all you need to do is find out which insurance provider to opt for and compare insurance policies using online insurance comparing websites. These websites provide you with a detailed analysis of various insurance plans as per your preference and need. Insurance providers across the country and helps you to take your decision in a better and profitable way. Forget about the paper heaped insurance buying process, in less than 10 minutes get insured. Make sure you invest well after all it’s your child s future you investing in.

Source: http://childplan.tumblr.com/post/144595633423/promise-a-secure-future-to-your-child

Saving For Child

Ensure Education of Your Children

Children are considered as budding assets of the nation. Hoping that they grow up to become future professionals is the optimistic hope of people who are associated with them. Research shows that almost 57 million children are still out of school in Africa alone. The challenge of literacy is huge and many NGO”s , organizations are working towards curbing the illiteracy and giving a hope for the future of children. No doubt the data is highly alarming and sends shockwaves through the administrative sections of different countries around the world.

Research also shows that most of the children are forced to withdraw from school and start earning due to financial crunches. This does not necessarily mean that such children came from a poor background, but due to unfortunate events they were forced to do so. Some of them lost their parents and loved ones, while others lost everything due to natural calamities, whereas many didn’t have a source of income. This can happen to any child of the world and nothing can be more disheartening than to see a child struggling for his and his family`s life.

We as individuals most of the times concentrate on our present and give little of time to our future. Have we ever thought, how can our children sustain life if something happens to us? In this growing inflation, how will they be able to complete their education to the best of their desire? Don’t we want that no matter whatever happens they should not compromise on their living standards?

Questions are many but the answer is one, “Future Investments”. Child insurance plans assures that your child, whom we have nurtured with slewed heart is financially independent and do not have to compromise on their way of living. Education inflation would be taken care by the insurer and also convenient financial assistance would be provided to your child at various stages of life.

Insurance makes life easier in future but when it comes to children, one needs assurance. Child plans make sure that assurance is assured by the the leading insurers. Keep your trust on the investments and make sure you have the insights of the plans you are opting for.

Source: http://childplan.tumblr.com/post/144239779168/ensure-education-of-your-children

One Good Habit That Can Change Your Child’s Future!

There is a famous line from William Wordsworth’s poem: Child is the father of man!

In simple words it means that whatever you are and whatever you think as a child, that’s the kind of person you are going to be after growing up! The habits you have as a child will form the man in you in the future!

When you become a parent, you want to imbibe the very same good qualities and impart the same teachings and ethics that you have to your child for his/her better future. To ensure that your child grows to be a good human being and lives a happy and secure life, you need to follow certain habits and let those also get passed on to your children as well so that they can carry on the tradition! One of the most important things you can do for your child is to invest in a child insurance plan. You may say that you’re young and are going to be around to take care of him, but then why not have your child more resources, if he can!

Let’s help you understand how a child insurance plan can really be a boon for your child’s glorious future:

1)  Education

You have beautiful dreams for your child’s education and even your child might want to go for the moon! But would you be able to afford the moon when he grows up? Would education be economical enough to fit inside your pocket? Well, look around, the cost of good education in today’s times is going through the roof, think 15-20 years down the line and you’ll realize that you might need additional help. Investing in child insurance will ensure that by the time the policy matures, the investment you made over the years will eventually help your child in getting a higher education of his choice.

2) Savings

Paying premiums on insurance might seem a bit heavy on your budget, but consider your financial goals over the years. Right from your child’s primary education to higher education, his marriage and other important milestones in his life would require funds. This habit of saving money and investing in insurance will not only assure guaranteed returns, it will also mean that you’re safeguarding his future with regular savings. As it is said, rupee saved is rupee earned!

3) Health Emergencies

Gone are the days when people used to suffer from genetic diseases. With changing lifestyles and the world getting affected from newer and crazier diseases every other day, it becomes absolutely necessary to have an insurance cover to meet any health emergency. It is best to start investing in such a plan from childhood when your child is hale and hearty so that in future, if unfortunately the child happens to suffer from some disease, he will have adequate funds to get proper medical treatment. Health is still the best wealth that one can boast of and to save money for better maintenance and treatment of health related issues is the wisest of decisions!

4) Loans

You might save enough money for their education, but there are good chances that you still might be short of some amount. For those unforeseen circumstances, a Child Plans will come most handy as it is widely accepted by all the financial institutions as collateral for loans for higher studies. This way your regular small savings over the years will result in getting your child his dream education!

5) Death

Life expectancy is rising in our country thanks to better health care facilities, but there is still no guarantee of a long-life! Life is still fragile and in the unfortunate scenario of your death, your child’s life should not turn topsy-turvy, at least financially! The child’s education, day to day expenses and future should be insulated against such emergencies! Having an insurance policy is a safety net your child requires the most in your absence!

Source: http://childplan.tumblr.com/post/144086899343/one-good-habit-that-can-change-your-childs

How To Plan For Your Child’s Future With Mutual Funds?

With cost of higher education shooting up, fixed income return options are unlikely to help you save for your child’s future. You need to aim for equity returns.

People usually save either for retirement or with a specific goal in mind. One of the goals is children’s future like education or marriage, while other goals could be to buy a house, car amongst others. This article focuses on the children’s future as a goal.

There are 3 key variables that you broadly need to keep in mind when planning for children:

The amount you may need for the child’s education (and marriage)

Years left to the event

Return expectation to build in

As you can see, there is a vast difference in the monthly amount you need to save, with difference combination of years left, and returns you will earn.

So our first advice to you is to start early. If you start investing for a child when you marry, you may have as many as 20 years ahead of you. But if you start when the child is say 5 or 8 years old, then you could be left with barely 10-12 years. The more the years you have, the less you need to set aside on a monthly basis.

The other critical part is the return your savings are generating. It is common to find parents investing in fixed deposits or Public Provident fund(PPF) to sponsor their children’s education or marriage. While as an investment option it is safer, it also generates paltry returns of 8-9% per annum. While interest on PPF is tax-free, that on fixed deposit is taxable, which pulls down the post-tax returns even further. Given the rate at which cost of higher education is shooting up in the country, debt definitely seems an investment option not worth considering.

As against this, if you try to aim for equity investments, your returns could be between 12-14% per annum, which is the bare minimum returns equity markets show over long periods.

As your approach the last 2-3 years of the child’s educational needs, you can choose to shift the portfolio towards debt, to eliminate any volatility risk – though this would not be a major consideration as the requirement for funds would be spread over a 3-4 year period.

Many parents prefer to open an investing account in the name of the child, in order to isolate the account, accommodate for gifts in the name of the child, and for tax reasons. If you plan to save in the name of the Child Plans. The best investment is in an investment in education".

Source: http://bestsavingsplan.tumblr.com/post/143835066329/how-to-plan-for-your-childs-future-with-mutual