5 THINGS TO CONSIDER FOR CHILD PLANNING

Just became a parent? Having sleepless nights taking care of the newborn and also thinking of your finances ahead? Well that is obvious that once you become a parent your focus automatically shifts on to addressing the financial issues unlike in the past.  According to Chunk, a business relations professional, “It was not until I was pregnant that I realized the various expenses related to childbearing and delivery.” So, what are the expenses she is talking about? Let’s take a look-

1. Child Delivery Expenses

Maternity charges are on the rise. Starting from expenses related to regular health checkups to myriad vaccinations and eventually to the fees of a modest nursing where one is billed anything between INR 80,000 to a few lakhs, expenses are humongous. Hospital bills also vary depending on your room and food preferences, neonatal care and medical expenses. One is lucky if the child is delivered in good health, otherwise Neonatal Intensive Care Unit (NICU) charges can get very taxing.

2. Post-Delivery Expenses

If you are a corporate or government employee, you are lucky that you’ll still be covered by your salary. But if you are a private firm employee with limited privileges, then it gets difficult. It even gets worse in case the new mother doesn’t belong to a well off family and she’s financially dependent on the spouse. No matter how loving one’s partner is, financial implications always make one nervous. Post-delivery expenses include essential stationery, baby food, medicines, immunity care, vaccinations etc.

3. Traditional Expenses

Childbirth calls for a huge celebration. It is a moment of joy for friends and relatives to receive a new member in the family. Parents take hit on their personal finances to ensure the child is received with gold and other expensive gifts and toys. Parties are thrown, a huge list of guests are invited. Depending on family traditions there are miscellaneous expenses associated with the welcoming of the new child who may include offering feast to the Brahmins and a number of deities.

4. Growing Up Expenses

As the Best Child Insurance Plan grows, it is always important to have an emergency fund because till a certain age, the child is likely to fall sick while trying to adjust with the environment. An emergency fund secures a lot of uncertainties and ensures you are able to consult a doctor regarding your child’s health. You can also consider a family floater for health insurance to take care of recurring medical expenses. Apart from health issues, when the child is around 2 or 3, getting him or her into a good crèche/school is the biggest investment that parents contemplate on from the very beginning.

5. Upbringing for the first child

Are you already nervous after reading the above expenses? Well, the estimation of finances is not over yet. While you think of all these expenses for you’re your second child, you cannot ignore the expenses related to your first child.  That’s exactly what Sasmita, a middle income HR professional had to say, “Although the stress wasn’t as much when we had planned for the first baby, but as we plan for a second baby, we can see how difficult it can get to ensure we do not compromise a bit on the expenses related to our first child”. Indeed, as parents, it is our responsibility that before we plan for a second child, we ensure that we aren’t compromising a bit on giving our first born a good upbringing.

Source: http://blogs.rediff.com/childplans/2016/06/24/5-things-to-consider-for-child-planning/

Who Else Wants To Know How Child Plans Work

The birth of a child brings immeasurable joy to parents. However, after the initial euphoria subsides, the future expenses start staring at you in the face. Add to this the innumerable ads on TV and print media, and you’re left with only one choice: buy a child plan.

That’s the beginning of your second problem – there are innumerable child plans out there. How do you know which one suits you the most?

Ask yourself these questions.

1. When will your child need the money?

2. How much will you need for the particular goal (marriage, education)?

3. How much will you be able to save?

4. How much insurance cover do I need?

Understanding Child Insurance Plans

There are basically 3 types of child insurance plans.

Money-Back: This is by far one of the most popular plans. Under this plan, your child will get survival benefits at regular intervals. For example, when he turns 18 years, he would get about 20% of sum assured, and a further 20% at age of 20 and so on. This plan is useful for those who feel the need for lump sum requirement at regular intervals and helps you in life stage planning.

Another benefit these plans offer is the premium waiver benefit, which ensures that in case of death of the parent, then the premiums are waived off and the policy continues with benefits.

A disadvantage of depending on this alone is that its returns often fail to match inflation, especially if you are planning to buy it for your child’s education. Education costs are growing at around 12% whereas money-backs would give you around 7-9%, leaving you grossly underfunded at the time of goal. Also, the premiums are steep.

ULIPS: ULIPs are non-traditional plans wherein returns are market-dependent. If the parent dies (or, as in the case of some policies, gets diagnosed with some critical illness), then the child would receive the sum assured in a lump sum. Also, future premiums are waived off and on maturity, the child would get the fund value too.

ULIP plans offer variety of funds ranging from conservative to balanced or aggressive. Under ULIPs, you can change from debt to equity and vice versa without the worry of taxation, thus enabling you to benefit from both timing the market and also rebalancing your portfolio.

But, ULIPs levy a variety of charges by way of premium allocation charges, policy administration charges, mortality charges, fund management charges, etc. This would affect the returns generated by the investment in market related instruments and ultimately the corpus that your child receives. Another negative of ULIP is that in case of an emergency, if you want to surrender or do partial withdrawal, the charges are high and also attract tax.

While a long term ULIP (above 15 years) could actually cost less than a mutual fund, it is less flexible. You just can’t move from one ULIP to another as in case of mutual funds. If you are putting your entire money in child ULIP plans and if it underperforms on a consistent basis, you are stuck!

Endowment Policies: Endowment policies are one where lump sum amount is paid at the time of the maturity along with bonuses. This is very useful to plan for your child’s big expenses like wedding, higher education, etc. And, unlike ULIPs, there is a minimum guaranteed amount of payment. Besides, you may get bonuses too.

Endowment policies too invest in market-backed securities, but unlike ULIPs, they invest only in debt products and the returns too are not exactly spectacular. And, if you require higher cover, you will have to pay a steeper premium. So, an ideal way is to take up an endowment policy as a debt portion of your overall asset allocation.

Almost all Child Plans cover the parent and thus, if in an event of an unfortunate untimely death of the parent, the child’s needs would still be taken care of by way of lump sum payment on death and also on maturity. But beware of plans that cover the child and not the parent! It is your child who needs financial security and not you!

Another thing to be noted is that, there are riders like waiver of premium offered along with child plans to cover the untimely death of the parent. The policy continues here at the absence of the parent, but the benefit comes at a high cost as the premium increases due to this rider. And, the mortality rate charges for a child plan are quite high too.

Source: http://blogs.rediff.com/childplans/2016/06/14/ritikashah11998-18/

Why I Refuse to Force My Kids to Hug and Child Plan

I don't know if anyone else remembers being a kid and having your parents tell you, "Okay. Kiss so-and-so goodbye!" and we did, because that is what we were supposed to do and we didn't want to upset our parents or whatever grown-up it was. And we hated it. At least I did. It made me feel so uncomfortable deep down in my soul to have to force physical affection when I knew I didn't want to. But I did it rather than give my parents any kind of issue.

The more I think about that reaction that I had, the less I want my own daughter to have to go through that.

That we ourselves are in charge of what happens. What affection we give and receive is up to us, they say. In a world overrun with the debate about rape culture and who is at fault in an accused sexual assault, why are we teaching our kids that they have to provide physical forms of affection to anyone they don't want to?

For some time now, I have thought maybe I was looking too hard into this issue. Maybe it's not a big deal. But it IS a big deal. It's a huge deal. Kissing is an intimate act. Eventually in their lives, it will be something that they use to convey their own very personal affections to another person. It will be the start of an intimate relationship. It's a sign of friendship. It's a sign of love. It's something that no one should be forced to do when they don't want to, and especially to someone they don't want to. I want my daughter to grow up confident and in control of her body and her mind and I cannot with good conscience think that and then in the next breath tell her to kiss someone.

A lot of people don't think this is a big deal. The response I tend to get when this discussion is brought up is, "Well, I did it. I'm fine," or "Do you want to offend (insert relative here)?" I don't want to offend anyone, but more than that, I don't want to force my daughter to kiss anyone. I don't want to teach her that her affections, especially of the physical variety, are something to be commanded from her.

My feeling as a Best Child Plan was that it would be over quick, so get it over with. I think hard about that reaction. It goes deep. I then think about my daughter as a teenager. Peer pressures. Some boy who says she should kiss him, or do something else. Will she feel she should do it so as not to offend him? So as not to upset him? It will be over quick, so get it over with. Yes. That is exactly what I feel I am teaching her by forcing her to kiss people she doesn't want to now, as a child.

My son is now eleven years old, going on twelve. When he was a toddler, I used to tell him, "Give so-and-so a kiss goodbye!" and I could see in his face it made him uncomfortable. I didn't care who it offended. I stopped. I never made him do it again. Nowadays, he hugs who he wants to. He gives a pound. He is NEVER rude, always kind, and he never has to kiss anyone. When I pick him up from his grandparents, I remind him to tell his grandparents goodbye, but I never tell him to kiss anyone. I won't. I refuse.

It's important to me that in today's world of blurred lines regarding physical affections to make sure my kids know that their body is THEIR BODY. No one else's. No one can force them to use their body in a way that makes them uncomfortable. They do not EVER have to allow that from anyone. In most cases of sexual abuse, the abuser is Family. An older friend. Counselor. Clergy. Neighbor. These are the same types of people we force our kids to kiss goodbye. In my mind, how can I teach my kids not to allow someone familiar to touch them in inappropriate ways if I am telling them to provide affection to familiar people when they don't want to? This doesn't make sense, and yet so many of us were taught it was okay.

So when my kids are visiting someone and it's time to go, you will not hear me tell them to kiss anyone goodbye. Ever. I don't care who it offends. If they want to, they are free to do so, but that is their choice and not my command. They are the masters of their own bodies, and I want it to stay that way.

Source: http://www.blogher.com/forcing-kids-hug-and-kiss-people-why-i-say-no

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