Child policy caters to your kid’s financial requirements during your lifetime and after your death. He/she gets the matured amount as a beneficiary. It’s available in regular payouts or a lump sum. The funds can mainly help provide for your child’s education which is one of the major costs to secure his/her future. Here is how to plan your kid’s education fund in 2023.
Assess Your Current Financial Position
To determine how much you need to save every month to build your child’s education corpus, you must see how much money you presently have. Now based on your investment capacity, you can set a budget, for instance, allocating up to 20% of your funds just for your kid’s higher studies.
Use a Child Education Planner
Hard to decide exactly how much to save for your kid’s education? Use a child education planner to help yourself. To calculate the estimated cost of your child’s education, consider the following expenses:
- The stream of studies your child may pursue
- Tuition fees
- Cost of learning material
- Rent and living costs for studying abroad
Follow these steps to use the planner:
- Enter your and your kid’s current age.
- Select the preferred education you want your child to have. For example, if you wish him/her to become a doctor, choose the “Doctor” option.
- Enter the anticipated cost for the desired education.
- Enter the anticipated cost for the desired education.
- Enter the anticipated age when you think your child will need the corpus.
- Research the projected rates of inflation over the coming years and consider their average. Enter the value and change the rate of the growth of the investment. It’s the expected annually compounded rate of return from your investments. The real rate highly depends on the kinds of investments chosen.
- Click on “Calculate” to find out the total cost of education and how much you should save annually to meet your objective.
Choose the Right Child Policy
Choose the right child education plan based on your needs and convenience:
- Traditional Child Policy: Here, you invest in the debt market. The policy offers non-guaranteed/guaranteed payouts. You can have security through low-risk investments into different debt avenues.
- Unit-Linked Investment Plan (ULIP): It offers dual benefits of life insurance and investment for wealth creation. Your investment is split into equities and debt instruments based on your risk appetite. So, you can earn high returns from the equity market and rebalance the risk with returns from debt funds. Although a ULIP invests your money in high-risk products, it has the potential to offer higher returns.
- Single Premium Insurance Plan: Sometimes, you may have difficulty remembering the payment dates and the premium amount payable annually. This insurance option allows a lump-sum payment without compromising the perks.
- Regular Premium Insurance Plan: It lets you opt for the plan benefits you want for your child. This policy offers the flexibility to align the investment term with your active earning period. You can also choose a suitable frequency of investment (monthly, quarterly, bi-annually, etc.).
Consider being an early bird to invest in child policies to accumulate enough wealth in the long run and balance any losses by earning returns over the maximum period.
