How to use an online savings plan to secure your child’s education fund?

How to use an online savings plan to secure your child’s education fund?

The rising education costs in India and abroad have made it essential for every individual to save for their child’s education. Research says that education costs have almost doubled in just a few years. So if your child is 5 years old now, by the time your child is in college, the expected education costs would have increased 4-5 times. And to meet these expenses choosing an appropriate savings plan is necessary.

Here are few tips to consider before choosing a savings plan for your child’s education.

Choose a fund with high assured sum: Look for a plan that assures a sizeable assured sum, almost 10 times your current income. Moreover, the returns must be high enough to beat inflation. Depending upon your needs, you can choose insurance plans such as ULIPs or child insurance plans. If you are a safe investor, you can choose plans that offer guaranteed yet comparatively higher return. Incase if you have a longer tenure to fulfil your goal, you can choose moderate risk plans to increase your returns and have little more stability than high risk products.

Look for funds with low expenses and higher benefits: There are few funds where you may have to pay high charges over the premium amount, thereby increasing the premium unnecessarily. Either choose plans that provide you higher returns at nominal charges or plans that provide you greater benefits like wealth boosters, loyalty addition etc. thereby reducing the net cost.

Choose plans with premium waiver benefits: Few plans have waiver benefits wherein the insurance company waives off the remaining premium in the event of death of the parent. The assured sum is paid to the child for continuing his education or pay for his/her expenses in the absence of the earning parent. Few plans also allow you to choose the payouts, which can be either lump sum or in intervals such as quarterly or monthly to manage the expenses better.

Look for partial withdrawal options: Few savings plans allow a partial withdrawal facility. Choosing such funds help you to meet any financial exigencies.

Read more to know about What is Partial Withdrawal in ULIPs?

Select the desired policy term: Choose your policy term according to your goals to have the required funds when it’s time. Know your child’s tentative education deadlines and fix your returns just few months ahead of that time. For instance, if your child is 15 years old and you want to fix a certain sum for his/her higher education. Your tenure for the plan would be 5 years when he is ready for his masters.

Therefore having a sound investment plan for your child is crucial to be able to fulfill any financial liabilities of your child. Moreover, you would have to choose plans that give you a higher rate of return and do not lead to capital erosion. You can also choose a fund that gives you guaranteed returns so that you are aware of the maturity amount you will receive on the completion of the policy tenure.

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Josephine Joyce

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