How to Fund Your Child’s Higher Education with a Child Education Plan

A child education plan policy is a mix of investment and insurance for your child’s education. You can choose the ideal saving plan for your child and prepare ahead for his or her career and future. Even if you are not present, the returns will be sufficient to help your child fulfil his future needs.

Delayed preparation has been one of the major factors preventing parents from providing their children with a well-planned financial foundation on which to pursue their career goals. The need of having a proper financial plan to ensure your child’s future has grown critical in recent years, as the average cost of pursuing higher education has increased dramatically. The other area that demands greatest care and planning on the part of the parents is marriage, which has seen a large increase in expense.

Child Education Plan Calculator’s Importance When Purchasing a Child Plan

A child education plan calculator is a free online financial tool that helps you figure out how much money you’ll need for your child’s education. When buying a child life insurance policy, it’s usually a good idea to use a child investment plan calculator to get detailed and definitive information on the premiums you’ll have to pay. The calculator can also assist you in predicting the amount you’ll need to ensure so that your child’s education is stress-free.

How to fund your child’s higher education with a child education plan?

  • Your first step as a policy shopper should be to establish and prioritise your goals, as well as the monetary value associated to them. In other words, you should be able to estimate how much you plan to spend on your child’s education or marriage. This will assist you in determining the premium amount and policy term.
  • After you’ve decided on a time period, you’ll need to figure out how much money you’ll need to invest each year to reach the target amount at maturity, either with the help of a financial advisor or on your own.
  • Last but not least, you must confirm that the insurance you are purchasing is on your (the parent’s) life and includes a premium waiver to ensure that future premiums are paid even if you die during the policy’s term. This will ensure your child’s corpus at adulthood, regardless of the conditions.

Other factors to consider while funding your child’s higher education with a child education plan:

  • If your risk profile is minimal and he wants the plan to mature in 10 years, he should choose a child endowment plan. Although the negative is minimal returns, it protects you from market volatility. Similarly, a unit-linked kid plan should only be considered if the risk profile is moderate to high and it is viable to invest for more than 10 years. When three years from maturity, however, it is advisable not to risk this plan by changing money from all-equity to safer funds.

  • The policy’s length is customizable, so it may be tailored to your child’s educational or marriage milestones. As a result, a strategy with high allocation costs and low returns should be avoided.
  • Children’s policies are typically more expensive than other market-linked plans. The mortality charge charged on the sum assured and the value of future premiums that the insurer is required to pay if there is a claim is the primary reason for this. This mortality charge is required because it offers life insurance. Direct investments, on the other hand, are an alternative, as is purchasing a pure term insurance policy with a high coverage level. It will usually be more successful, but discipline is required.

  • Overall, an equity-based plan with a capital guarantee element should be preferred so that your money is not exposed to capital market volatility. Typically, individuals plan this using investment vehicle such as mutual funds and fixed deposits, which is inefficient because the child’s goals are set and must be realised, even if the parents die.

Why a child insurance plan is necessary?

  • Bringing Your Child’s Dreams to Life

If you start saving for your child’s education now, the costs will be substantially higher when your youngster is ready to enrol for higher education. At the time of maturity, the accumulated corpus will be sufficient to cover the costly college tuition. At the end of the policy term, the child will get maturity benefits to ensure that his or her goals come true. You have a variety of options for your child’s schooling.

  • Unforeseen Circumstances

One of the most important advantages is the financial protection provided to the child in the event of a parent’s death. At least 100% of the sum insured is paid to the covered child. As the maturity amount is nearly 10 times the premium cost, the policy continues to cover for higher education expenses.

  • Options for Selecting Add-ons/Riders

Even if you’ve purchased the best savings plan for your child, you should supplement it with rider benefits. You can choose a child plan that includes a premium waiver if something bad happens to the policyholder during the policy term, as well as other rider benefits including personal accident insurance rider benefit cover-up for severe accidental injuries and accidental deaths. Please note that riders are not mandatory and are available at additional cost.

  • Partial withdrawals

You can withdraw money during the policy’s term to support a unique course your child wants to attend, such as studying an instrument or acting, for example. Certain plans provide periodic pay outs to assist you in covering the costs of increasing your child’s talent.

  • Preventing Capital Loss

Even your investment results can fluctuate due to market volatility. To make the most of the money invested and avoid capital loss, a dynamic fund allocation plan must be used. You can also use a Systematic Transfer Plan (STP) and fund selection to plan your investments based on predicted returns and the amount needed to reach various milestones. When the market is volatile, you can use STP to swap to a different fund unit.

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